Corporate Governance Characteristics in Public Corporations : A Study of French Initial Public Offerings

The underlying premise of this study is that when private firms go public there is separation of ownership and control, which creates an agency problem. The board of directors is a tool that mitigates agency problems and a characteristic that determines the effectiveness of the board is board size. The main consensus among finance academics is that the board of directors should be small in order to effectively manage the agency problem, and this is reflected in better financial performance. We try to determine how different factors shape the size of the board of directors in IPOs. These factors include: venture capitalist, ownership structure, firm-specific characteristics and CEO characteristics. This paper employs a sample of 852 IPOs from 1995 to 2008, to study the determinants of board size. The determinants of board size are analyzed in a regression frame work. Also extra tests are conducted to address any endogenous relation between the board size and other variables such as ownership structures, board structure and firm performance