Large Shareholders, Board Independence, and Minority Shareholder Rights: Evidence from Europe

24 Pages Posted: 25 Aug 2008

See all articles by Kenneth Kim

Kenneth Kim

Tongji University - School of Economics and Management; SUNY at Buffalo - School of Management

John R. Nofsinger

University of Alaska Anchorage

Pattanaporn Chatjuthamard

Sasin GIBA

Date Written: August, 25 2008

Abstract

We examine the relation between minority shareholder protection laws, ownership concentration, and board independence. Minority shareholder rights is a country-level governance variable. Ownership structure and board composition represent firm-level governance variables. Prior research hypothesizes anddocuments a negative relation between countries' minority shareholder rights quality and firms' ownership concentration. We introduce the hypothesis that shareholder protection rights and firms' board independence are positively related. When a country's minority shareholder rights are strong, thenminority shareholders should have the legal power to affect board composition. Using a sample of large firms from 14 European countries, we test both hypotheses and find that countries with stronger shareholder protection rights have firms with lower ownership concentrations and with more independent directors, consistent with both hypotheses. We also find evidence that ownership concentration and board independence are negatively related.

Keywords: Large shareholders, Board independence, Shareholder laws, Europe

Suggested Citation

Kim, Kenneth A. and Nofsinger, John R. and Chatjuthamard, Pattanaporn, Large Shareholders, Board Independence, and Minority Shareholder Rights: Evidence from Europe (August, 25 2008). Buffalo Legal Studies Research Paper No. 2008-23, Available at SSRN: https://ssrn.com/abstract=1254655 or http://dx.doi.org/10.2139/ssrn.1254655

Kenneth A. Kim (Contact Author)

Tongji University - School of Economics and Management ( email )

Siping Road 1500
Shanghai, Shanghai 200092
China

SUNY at Buffalo - School of Management ( email )

Jacobs Management Center
Buffalo, NY 14222
United States

John R. Nofsinger

University of Alaska Anchorage ( email )

3211 Providence Drive
Anchorage, AK 99508
United States

HOME PAGE: http://faculty.cbpp.uaa.alaska.edu/jnofsinger/

Pattanaporn Chatjuthamard

Sasin GIBA ( email )

Bangkok
Thailand

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