Friendly or Controlling Boards?

Resumen

Evidence concerning the impact of boards on firms’ governance and performance remains controversial. We explore the issue of board effectiveness by examining the supervisory role boards play and their advisory function. We examine the importance of these two roles in various contexts and control for the endogenous nature of the representative variables in boards. Our paper uses a sample of European firms to highlight that in certain settings, the advisory function of boards provides higher explanatory power for performance than does the monitoring function, and that larger and less independent boards may improve governance and consequently enhance performance.