Family pyramidal holdings and board of directors. (27th September 2007)

• Record Type: Journal Article
• Authors: Attig, Najah
• Is Part Of: International journal of business governance and ethics. Volume 3:Number 4(2007)
• Page Start: 394
• Page End: 406
• Publication Date: 2007-09-27
• Subjects: board size -- outside directors -- opacity -- family pyramidal holding -- corporate governance -- business governance -- ownership structure -- monitoring effectiveness -- board of directors; 658.4
• Languages: English
• ISSNs: 1477-9048

Abstract

In this paper we relate the board's attributes to the firm's opacity as measured by the adverse selection component of the bid-ask spread. We find that larger boards and outside directors are associated with reduced opacity, especially in freestanding firms. However, directors' excess control is associated with a significant increase in firm's opacity. We also find that the presence of family pyramidal holding defuses any potential monitoring benefits of board attributes. Our findings suggest that the firm's ultimate ownership structure is not neutral in determining the monitoring effectiveness of the board of directors. This might help explain existing mixed evidence on the monitoring role of the board of directors.