Éditeur(s) : HAL CCSD
Résumé : This paper develops a two-way director-firm fixed effect model to study the relationship between independent directors’ individual heterogeneity and firm operating performance, using French data. This strategy allows considering and differentiating in a unified empirical framework mechanisms related to board functioning and mechanisms related to director selection. We first show that the independence status, netted out unobservable individual heterogeneity, is negatively related to performance. This result suggests that independent board members experience a strong informational gap that outweighs other monitoring benefits. However, we show that industry-specific expertise as well as informal connections inside the boardroom may help to bridge this gap. Second, we provide evidence that independent directors have higher intrinsic ability as compared to affiliated board members, consistent with a reputation-based selection process.
https://hal.archives-ouvertes.fr/hal-01060211

hal-01060211
https://hal.archives-ouvertes.fr/hal-01060211
https://hal.archives-ouvertes.fr/hal-01060211v2/document
https://hal.archives-ouvertes.fr/hal-01060211/file/cahier%202014-29.pdf

Éditeur(s) : HAL CCSD
Résumé : While often criticized, independence remains the ultimate criterion for evaluating board composition, whether for regulators or shareholder activists. In this study, we examine the relationship between board independence and firm operating performance in a panel of French listed companies, paying particular attention to heterogeneity and endogeneity concerns. We take advantage of an original database, with a time-series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues through GMM estimators. In addition, this database can be disaggregated at the individual (director) level. This design enables us to introduce firm fixed effects and individual fixed effects in (firm) performance equations, thereby controlling for heterogeneity at the firm and individual levels. To our knowledge, this is the first paper so far to provide a systematic account on this issue for France. Our main result is to document a significant negative relationship between accounting performance and the independence status (irrespective of the person). This result supports the argument of an information gap suffered by independent board members, as developed by Adams and Ferreira (2007).
https://hal.archives-ouvertes.fr/hal-00919408

hal-00919408
https://hal.archives-ouvertes.fr/hal-00919408
https://hal.archives-ouvertes.fr/hal-00919408v2/document
https://hal.archives-ouvertes.fr/hal-00919408/file/cahier_de_recherche_2014-01.pdf