This study examines whether a board’s structure and composition are indicative of its monitoring effectiveness in terms of mitigating opportunistic management behavior. French companies may legally choose to operate with a board of directors (One-tier board) or a separate management board and supervisory board (Two-tier board). While the French Corporate Governance Code sets out uniform guidelines on board composition and activity regardless of a given board structure, respective directors face different challenges in establishing adequate management oversight.
Hence, externally prescribed board composition may have varying or unintended consequences. Further, both board structures have been attributed with different conceptual advantages that may influence their practical monitoring performance. Using the occurrence of earnings management as an indicator for poor management supervision, empirical results show that companies with two-tier boards are superior monitors.
More generally for France, I also find that independent boards are associated with less earnings management whereas busy boards are associated with more earnings management. I do not find a measurable impact of director financial expertise. Finally, mixed results are presented on the existence of a moderating effect of board structure on the relationship between board composition and earnings management.
Inhaltsverzeichnis (Table of Contents)
- INTRODUCTION
- LITERATURE REVIEW
- AGENCY THEORY AND OPPORTUNISTIC MANAGEMENT BEHAVIOR
- PRIOR RESEARCH ON EARNINGS MANAGEMENT
- EARNINGS MANAGEMENT AND BOARD MONITORING
- MONITORING IN ONE-TIER AND TWO-TIER BOARD STRUCTURES
- RESEARCH SETTING FRANCE
- HYPOTHESES DEVELOPMENT
- BOARD STRUCTURE
- DIRECTOR INDEPENDENCE
- DIRECTOR BUSYNESS
- FINANCIAL EXPERTISE
- THE MODERATING EFFECT OF BOARD STRUCTURE
- METHODOLOGY
- SAMPLE SELECTION AND DATA SOURCES
- MEASURING EARNINGS MANAGEMENT
- MEASURING BOARD MONITORING CHARACTERISTICS
- CONTROL VARIABLES
- MODEL SPECIFICATION
- DATA ANALYSIS
- DESCRIPTIVE STATISTICS AND CORRELATION
- MULTIPLE LINEAR REGRESSION RESULTS
- ROBUSTNESS ANALYSIS
- LIMITATIONS
- DISCUSSION & CONCLUSION
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This study investigates the relationship between board structure, board characteristics, and monitoring effectiveness in mitigating opportunistic management behavior. It aims to determine how the composition and structure of boards of directors in France, particularly the presence of independent directors, busy directors, and directors with financial expertise, influence the occurrence of earnings management. The study uniquely explores the role of board structure, specifically comparing the effectiveness of one-tier and two-tier board models, in shaping both monitoring effectiveness and the relationship between board characteristics and earnings management.
- The impact of board structure (one-tier vs. two-tier) on monitoring effectiveness.
- The influence of board characteristics (independence, busyness, financial expertise) on earnings management.
- The moderating effect of board structure on the relationship between board characteristics and earnings management.
- The occurrence of earnings management as an indicator of management opportunism and weak board monitoring.
- The application of agency theory to understand the relationship between management and shareholders in corporate governance.
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter introduces the research question, highlighting the importance of effective monitoring of management in mitigating opportunistic behavior. It establishes the study's focus on France, a unique context where companies have the option of choosing between one-tier and two-tier board structures.
- Literature Review: This chapter presents a comprehensive review of existing literature on agency theory, earnings management, board monitoring, and the differences in monitoring effectiveness between one-tier and two-tier board structures. It also discusses the rationale for choosing France as the study's research setting.
- Hypotheses Development: Drawing from the reviewed literature, this chapter develops hypotheses regarding the impact of board structure, director independence, busyness, financial expertise, and the moderating effect of board structure on the relationship between board characteristics and earnings management.
- Methodology: This chapter outlines the study's methodological approach, including sample selection, data sources, measurement of earnings management and board monitoring characteristics, control variables, and model specification.
- Data Analysis: This chapter presents the empirical analysis, including descriptive statistics, correlation analysis, multiple linear regression results, robustness analysis, and a discussion of limitations.
Schlüsselwörter (Keywords)
This research primarily focuses on the interplay between board structure, board characteristics, and earnings management in French companies. Key themes include agency theory, opportunistic management behavior, board monitoring effectiveness, one-tier and two-tier board structures, director independence, financial expertise, busyness, and the moderating effect of board structure on the relationship between board characteristics and earnings management.
- Arbeit zitieren
- David Port (Autor:in), 2021, The Case of France. Board Structure, Board Characteristics and Monitoring Effectiveness, München, GRIN Verlag, https://www.grin.com/document/1119262
