CAVACO Sandra

This paper examines the relationships between independence, director unobservable ability and firm performance. We develop an original empirical strategy based on the AKM model to estimate separately director fixed effects (as a measure of individual ability) and firm fixed effects. We show that board independence has an ambiguous impact on corporate performance because of two opposing forces: one related to the director nomination process, the other one related to board functioning. On one hand, we report that independence is positively correlated with individual fixed effects, an evidence consistent with a nomination process of independent directors based on individual ability. On the other hand, and regarding board functioning, we show that independence, netted out individual ability, is negatively correlated with firm performance suggesting that independent board members experience an informational deficit (as compared to affiliated directors).

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This article studies the relationship between board independence and firm operating performance in French listed companies. We take advantage of an original database, with a time-series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues. In addition, this database can be disaggregated at the individual (director) level. This design enables us to introduce firm fixed effects and individual fixed effects in firm performance equations, thereby controlling for heterogeneity at the firm and individual levels. Our main result is to document a significant negative relationship between independence and accounting performance. This result suggests that, in the French context, the costs of independence (i.e. the informational gap supported by independent directors compared to insiders and affiliated directors) outweigh the benefits of independence (i.e. the reduction in agency costs).

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While often criticized, independence remains the ultimate criterion for evaluating board composition, whether for regulators or shareholder activists. In this study, we examine the relationship between board independence and firm operating performance in a panel of French listed companies, paying particular attention to heterogeneity and endogeneity concerns. We take advantage of an original database, with a time-series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues through GMM estimators. In addition, this database can be disaggregated at the individual (director) level. This design enables us to introduce firm fixed effects and individual fixed effects in (firm) performance equations, thereby controlling for heterogeneity at the firm and individual levels. To our knowledge, this is the first paper so far to provide a systematic account on this issue for France. Our main result is to document a significant negative relationship between accounting performance and the independence status (irrespective of the person). This result supports the argument of an information gap suffered by independent board members, as developed by Adams and Ferreira (2007).

This article analyses the interactions between various dimensions of corporate social responsibility (CSR) that mediate the relationship between CSR and financial performance. We hypothesize that the absence of consensus in the empirical literature on the CSR-financial performance relationship may be explained by the existence of synergies (complementarity) and trade-offs (substitutability) between the different CSR components. We investigate such relationship using a final unbalanced panel sample of 1094 observations (around 300 firms per year) from 15 countries over the 2002-2007 period. Our results show that responsible behaviours towards employees (human resources dimension) and towards customers and suppliers (business behaviour dimension) appear as complementary inputs of financial performance, indicating mutual benefits and less conflict between those stakeholders. Conversely, responsible behaviours towards customers and suppliers and towards the environment appear as substitutable inputs of financial performance, suggesting more conflict between or over-investment towards those stakeholders.