Unpacking Board Model Choice in Europe: A Multi-Methods Approach

The design of corporate governance structures is major topic in the legal and management literature; yet there is little research on what accounts for the choices that companies make. This paper aims to contribute to this under-researched topic by examining the fundamental choice between corporate board models, notably, between one-tier and two-tier models (i.e. companies with or without a supervisory board). Based on data from 147,268 firms across fourteen European countries, it finds that the choice of board model is associated with the composition of the company’s shareholders, personal characteristics of the company’s directors and different types of firms. In addition, the paper exemplifies the benefits of applying a multi-method approach, being based on a combination of regression and random forest analysis, as well as qualitative interpretation. The random forest analysis, which had not yet been applied to this question, was found to be particularly helpful in understanding, by means of exploratory research, a large number of possible reasons, forms of non-linearity and other complexities.