Dominant shareholders, corporate boards, and corporate value: A cross-country analysis

We investigate the relation between corporate Value and the proportion of the board made up of independent directors in 799 firms with a dominant shareholder across 22 Countries. We find a positive relation, especially in Countries with weak legal protection for shareholders. The findings suggest that a dominant shareholder, were he so inclined, could offset, at least in part, the documented value discount associated with weak country-level shareholder protection by appointing an 'independent' board. The cost to the dominant shareholder of doing so is the loss in perquisites associated with being a dominant shareholder. Thus, not all dominant shareholders choose independent boards. (c) 2007 Elsevier B.V. All rights reserved.