Ownership structure and board structure: are corporate governance mechanisms interrelated?

Abstract

PurposeThe purpose of this paper is to control for the interrelationships between corporate governance mechanisms. Managerial ownership, external block holders' ownership, board independence, leadership structure and the size of the board, are perceived as the set of ownership and board characteristics embraced to interact in a system of corporate dynamics, which mitigate agency costs.Design/methodology/approachBy using an extensive sample of Greek listed firms and by applying a simultaneous equations framework in order to control the potential endogeneity, the paper's findings indicate interdependence among these mechanisms.FindingsMore specifically, companies whose CEO is also the chairman of the board tend to have fewer outside directors and lower block holder ownership. The paper also provides evidence that independent boards are more likely to be employed by firms with higher external block holder shareholdings and whose board size is negatively correlated with managerial ownership and board independence.Originality/valueThe aim of this study is to examine the interrelationships among ownership structure and board characteristics in a small open economy, such as the Greek economy.