Why do boards exist? Governance design in the absence of corporate law

Burkart, Mike ORCID: 0000-0002-0954-4499, Miglietta, Salvatore and Ostergaard, Charlotte (2023) Why do boards exist? Governance design in the absence of corporate law. Review of Financial Studies, 36 (5). pp. 1788-1836. ISSN 0893-9454

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Abstract

We study under which circumstances firms choose to install boards and their roles in a historical setting in which neither boards nor their duties are mandated by law. Boards arise in firms with large, heterogeneous shareholder bases. We propose that an important role of boards is to mediate between heterogeneous shareholders with divergent interests. Voting restrictions are common and ensure that boards are representative and not captured by large blockholders. Boards are given significant powers to both mediate and monitor management, and these roles are intrinsically linked.

Item Type:	Article
Additional Information:	© 2022 Oxford University Press
Divisions:	Finance
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance H Social Sciences > HF Commerce > HF5601 Accounting
JEL classification:	D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General K - Law and Economics > K2 - Regulation and Business Law > K20 - General N - Economic History > N8 - Micro-Business History > N80 - General, International, or Comparative
Date Deposited:	08 Jun 2023 09:33
Last Modified:	25 Apr 2024 19:21
URI:	http://eprints.lse.ac.uk/id/eprint/119365

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