Determinants of Board Members Financial Expertise - Empirical Evidence from France


International Journal of Accounting

December 2009, vol. 44, n°4, pp.378-402

Departments: Accounting & Management Control, GREGHEC (CNRS)

Keywords: Financial expertise, Board of directors, Supervisory board, Corporate governance

Very few countries require directors to be financially literate. This article investigates the determinants of boards' financial expertise using a sample of 95 nonfinancial French listed firms. We construct a measure of financial expertise based on educational and career background data for 943 individuals occupying 1140 posts in our sample and explore the determinants of average per-firm financial expertise using a Tobit analysis. We find that average financial expertise is negatively associated with board type (two-tier versus one-tier) and growth opportunities and positively associated with board independence, ownership concentration, and institutional ownership. These findings are robust to sensitivity analyses.