Law and Corporate Boards: Evidence from Europe
نویسندگان
چکیده
When minority shareholder laws are strong, then minority shareholders should have more power to affect board composition and structure. Therefore, countries with strong minority shareholder laws should have ‘good’ corporate boards of directors (i.e., one that looks out for minority shareholders’ bests interests). Assuming that boards with independent directors and fewer directors are indicative of ‘good’ quality boards, we hypothesize that a country’s law quality and the firm’s board quality are compliments, and thus positively related. In empirical tests, we find that European firms in countries with stronger shareholder laws have (i) more independent directors and (ii) fewer directors. We also provide some evidence on causality; of how strong laws lead to good boards. Our overall findings imply that countries should have strong shareholder laws in order for their firms to have good firm-level governance. Law and Corporate Boards: Evidence from Europe
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