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Do CEO-directors school ties enhance the firm’s competitive position?
[La proximité du dirigeant et des administrateurs renforce-t-elle la position concurrentielle de la firme ?]

Author

Listed:
  • Cédric van Appelghem

    (UEVE - Université d'Évry-Val-d'Essonne, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris])

  • Pascal Nguyen

    (MRM - Montpellier Research in Management - UPVM - Université Paul-Valéry - Montpellier 3 - UPVD - Université de Perpignan Via Domitia - Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School - UM - Université de Montpellier)

  • Younes Ben Zaied

    (EDC - EDC Paris Business School)

Abstract

France stands out for the restricted number of highly prestigious schools in which most of its business elites have been trained. This inevitably leads to the existence of close ties between the CEO and other board members. These school ties impede the monitoring function of the board of directors and do not incentivize the CEO to develop the firm's specific assets in view of enhancing its competitive advantages. The result is an increase in systematic risk, especially when the firm has few growth opportunities and uses low leverage. However, the presence of a large shareholder and greater coverage by financial analysts can serve as alternative control mechanisms capable of mitigating the effect of CEO-directors school ties. Taken together, our results underline the drawbacks of social ties and suggest that governance codes should take them into account.

Suggested Citation

  • Cédric van Appelghem & Pascal Nguyen & Younes Ben Zaied, 2021. "Do CEO-directors school ties enhance the firm’s competitive position? [La proximité du dirigeant et des administrateurs renforce-t-elle la position concurrentielle de la firme ?]," Post-Print hal-03274787, HAL.
    • Handle: RePEc:hal:journl:hal-03274787
    DOI: 10.3917/redp.312.0095
    as

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