French law mandates that employees of publicly listed companies can elect two types of directors to represent employees. Privatized companies must reserve board seats for directors elected by employees by right of employment, while employee-shareholders can elect a director whenever they hold at least 3% of outstanding shares. Using a comprehensive sample of firms in the Société des Bourses Françaises (SBF) 120 Index from 1998 to 2008, we examine the impact of employee-directors on corporate valuation, payout policy, and internal board organization and performance. We find that directors elected by employee shareholders increase firm valuation and profitability, but do not significantly impact corporate payout policy. Directors elected by employees by right significantly reduce payout ratios, but do not impact firm value or profitability. Employee representation on corporate boards thus appears to be at least value-neutral, and perhaps value-enhancing in the case of directors elected by employee shareholders. _______________________________________ IntroductionShould employees be allocated control rights in the companies for which they work? This question has long been debated, but has picked up impetus recently as societies have struggled to balance worker rights with effective corporate governance. While the collapse of communism has removed the most extreme examples of employee ownership, Germany and other countries mandate that workers be represented on corporate boards, and most western democracies encourage employee share ownership through tax, compensation, and pension policies. However, it is still unclear whether employee ownership or representation on the corporate board of directors increases firm value or productivity. This study exploits a natural experiment in mandated employee representation conducted in France--a major western country with both a market economy and a long tradition of robust worker employment protection-to determine whether giving workers control rights without cost to them creates value, and whether directors elected by employees who are also shareholders have a differential impact on firm value than do directors elected by workers as a right of employment.Employing a sample of French companies provides a unique institutional setting for empirical analysis. French law mandates that employees of large publicly listed companies be allowed to elect directors for two reasons. First, privatized companies must reserve two or three (depending on board size) board seats for directors elected by employees by right of employment. Since privatized firms are easily the largest and most valuable companies in France, this requirement induces significant representation on the boards of an important and highly visible group of companies by directors elected by workers who are not also shareholders. Second, employee-shareholders in any publicly listed firm have the legal right to elect one director whenever they hold at least 3% of outstanding shares. Additionally, French law allows but...

We examine board structure in France, which since 1966 has allowed firms freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt two-tier boards. There is enhanced sensitivity of CEO turnover to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest there are gains from allowing freedom of contract about board structure. AbstractWe examine board structure in France, which since 1966 has allowed firms freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt twotier boards. There is enhanced sensitivity of CEO turnover to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest there are gains from allowing freedom of contract about board structure. Freedom of choice between unitary and two-tier boards: an empirical analysis

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Research on the impact of open market share repurchases has been hindered by the lack of data available on actual share repurchases in many countries, including the U.S. Using a previously unused database containing detailed information on 36,848 repurchases made by 352 French firms, we show that corporate share repurchases have a significant adverse effect on liquidity as measured by bid-ask spread or depth. Our results also indicate that share repurchases largely reflect contrarian trading rather than managerial timing ability.a Both authors are from Cereg-DRM, Université Paris-Dauphine, place du Maréchal de Lattre, 75775 -Paris cedex 16 -edith.ginglinger@dauphine.fr, jacques.hamon@dauphine.fr. We are grateful to Gérard Rameix for providing the data about daily repurchases. We thank Bruno Biais, François Degeorge, Thierry Foucault, Frederick Harris, Bertrand Jacquillat, Meziane Lasfer, Myron Slovin, Marie Sushka and two anonymous referees for their helpful comments and suggestions. All remaining errors are our own.2