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Zoom URL: https://uni-frankfurt.zoom.us/j/61395845483?pwd=TGxZTDkwRmtUcjZwdklHdC9nSnpoUT09
Meeting ID: 613 9584 5483
Recent literature discusses how “menu laws” allow corporations to opt into one of multiple competing statutory regimes. This paper contributes to this literature as it presents original empirical research on the choice between corporate board models. Today, many countries not only allow modifications of a particular board structure, but they provide separate legal templates, giving firms a choice between a one-tier and a two-tier board model (and sometimes also a third hybrid model). How companies actually make use of this availability of “elective corporate governance” is, however, largely underexplored. The project underlying this paper aims to fill this gap. We collected original company data from the 14 European countries that permit a choice between two or more board models. Using the technique of propensity score matching, we examine whether board choice has an effect on financial outcomes, such as operating revenue, cash ratio and leverage. The results confirm that board choice matters and that, while there is a general decline of the use of the two-tier model, companies with a two-tier model perform better in some of the countries. A further finding is that deviating from the traditional model of country often leads to lower operating revenue; thus, choosing an unfamiliar model may often be disadvantageous.