Ownership, board structure, and corporate performance: Evidence of French VC-backed firms

Abstract

The purpose of this paper is to examine the effect of ownership structure and board structure on performance in VC-backed firms. Using 106 French VC-backed firms, our methodology in this paper is to estimate four equations. A regression analysis is then used to study the impact of ownership structure and board structure on performance and also to analyze whether ownership structure (ownership concentration, director ownership, venture capital ownership and employee ownership) and board variables (size, outside directors, COE-chairman duality, proportion of VC directors, proportion of employee directors and board meeting frequency) are significant determinants of VC-backed firm performance. Results indicate a strong positive relation between ownership concentration and performance and between director ownership and performance measured by ROE. And strong negative relation between ownership concentration and performance and between director ownership and performance measured by ROA. No strong relation was found between venture-capital ownership, employee ownership and firm performance. Results show also a strong negative relation between board size and performance measured by ROE and positive relation between board size and performance measured by ROA, Tobin’s Q and MVA. The proportion of independent outside directors on the board was positively associated with ROE and negatively associated with ROA. The presence of a dual leadership structure is negatively associated with ROE and positively associated with ROA. No strong relation was found between the proportion of venture-capital in board, the presence of employee in board, or board meeting frequency and firm performance.