François Belot

Freedom of choice between unitary and two-tier boards: An empirical analysis

We examine board structure in France, which since 1966 has allowed firms freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt two-tier boards. There is enhanced sensitivity of CEO turnover to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest there are gains from allowing freedom of contract about board structure.

Excess Control Rights and Corporate Acquisitions

French-listed companies exhibit a concentrated ownership structure, with the largest shareholder holding more voting rights than cash flow rights. This wedge predominantly stems from a typical system of double voting shares. This paper studies the acquisitions made by French-listed firms over the 2000-2009 period and investigates how these ownership characteristics affect acquisition likelihood and acquirer abnormal returns around announcements. Firms whose largest shareholder holds significant excess control rights are less likely to engage in mergers and acquisitions (M&A) activity. The separation of ownership from control is negatively correlated with acquisition quality; this is especially the case for firms that authorize double voting rights. This result suggests that controlling shareholders use corporate acquisitions as a means of extracting private benefits at the expense of minority shareholders. Moreover, it casts doubt on the effectiveness of a new regulation (February 2014) that generalizes double voting rights.

Labor Conflicts in French Workplaces: Does (the Type of) Family Control Matter?

This paper investigates the influence of family control on the quality of labor relations. Using French workplace-level data, we find that family firms experience less frequent and less intense labor conflicts. Moreover, family involvement tends to offset the negative effect of labor disputes on corporate performance. We examine whether specific family patterns are conducive to better labor relations. We distinguish active from passive family control, eponymous from non-eponymous family businesses, and break down family firms into founder-controlled and descendant-controlled companies. It appears that the benefits of family control are not attributable to a given type of family firm. These findings suggest that peaceful labor relationships are a peculiar attribute that families generally bring to corporations and extend our understanding of the “family effect�? on organizational performance.

Earnings Quality in Private SMEs: Do CEO Demographics Matter?: JOURNAL OF SMALL BUSINESS MANAGEMENT

This study investigates the impact of CEO demographics on earnings quality for private SMEs. Using a 2012 sample of 30,476 French firms, we first find strong empirical support for a gender effect: female‐run firms engage in less earnings management than do male‐run firms. This result is consistent with female CEOs being more risk averse than their male counterparts are when making financial decisions. Second, CEO age is negatively correlated with the magnitude of discretionary accruals, and the relationship between gender and earnings quality is stronger for older CEOs. Overall, our findings suggest that CEO demographics affect the quality of accounting information.

Family Control and Nominal Share Prices

We investigate the impact of family control on both the share price level and the decision to split the firm’s stock. Low stock prices are associated with higher volatility and have been shown to attract more speculative trading, which may force managers to excessively focus on short-term earnings. Moreover, a reduction in the stock price level is often associated with a loss of prestige. We hypothesize that family owners, who are typically long-term investors and are especially concerned about corporate reputation, prefer to set higher stock prices to mitigate short-termism, focus on long-term planning, and reinforce the firm’s prestige. Using a comprehensive sample of firms in the Société des Bourses Françaises (SBF) 120 Index from 1998 to 2016, we find a positive correlation between share prices and family control. Our investigations also indicate that family firms are less likely to conduct price reductions through stock splits. These findings suggest that a high stock price is a distinctive feature of family firms and that family owners have a specific norm in mind with respect to prices.

Do Women Engage in Less Earnings Management than Men?: The Case of Privately Held French SMEs

This study investigates the effect of a CEO’s gender on his/her decision to engage in earnings management. We focus on private small and medium-sized enterprises (SMEs) in a code-law accounting framework, namely, that of France. From a sample of 30,476 French SMEs for the year 2012, we use discretionary accruals as a proxy for earnings quality. We first provide evidence that French private SMEs manage earnings: the average value of discretionary accruals is above 9% of total assets. In accordance with our gender hypothesis, we show that, regardless of the model used, firms run by female CEOs engage in significantly less earnings management than firms run by male CEOs. This result is robust to various tests for endogeneity. Moreover, we highlight a negative effect of the feminization of top management on the level of discretionary accruals. Finally, we consider another observable CEO characteristic, namely, age. We find that CEO age is negatively correlated with the magnitude of accruals, but the effect of gender remains significant.

Lessons from the French Exception: How Firms Choose between Unitary and Dual Boards

Many governance reform proposals focus on strengthening board monitoring. In contrast, Adams and Ferreira (2007) and Harris and Raviv (2008) conclude that a passive board is often optimal. We examine determinants of board structure choice in France, where firms are free to choose between a unitary (passive) board and a dual (monitoring) board. We find firms with greater asymmetric information are likely to adopt a unitary board. Firms with a high potential for private benefit extraction are likely to adopt dual boards. Firms well monitored by financial market and institutional forces are less likely to have dual boards. Our results imply that freedom of contract about board structure is valuable for shareholders.