Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Board size and firm performance: the moderating effects of the market for corporate control

Board size and firm performance: the moderating effects of the market for corporate control We examine whether takeover threats affect the importance of board size using the passage of state antitakeover laws enacted in mid-to-late 1980s as our empirical setting. While the Complement Hypothesis predicts that board size matters more before the passage of the laws, the Substitute Hypothesis predicts the opposite. For a sample of 350 Forbes 500 firms over the period 1984–1991, we find a significant association between smaller boards and better firm performance before passage of antitakeover laws, but a much weaker relation (reduced by more than one-third) after the takeover restrictions were in place. Consistent with the Complement Hypothesis, this finding suggests that decreasing board size is more valuable when the market for corporate control is more active. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Board size and firm performance: the moderating effects of the market for corporate control

Loading next page...
 
/lp/springer-journals/board-size-and-firm-performance-the-moderating-effects-of-the-market-MmEB5oFZlA

References (44)

Publisher
Springer Journals
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
DOI
10.1007/s11156-007-0074-3
Publisher site
See Article on Publisher Site

Abstract

We examine whether takeover threats affect the importance of board size using the passage of state antitakeover laws enacted in mid-to-late 1980s as our empirical setting. While the Complement Hypothesis predicts that board size matters more before the passage of the laws, the Substitute Hypothesis predicts the opposite. For a sample of 350 Forbes 500 firms over the period 1984–1991, we find a significant association between smaller boards and better firm performance before passage of antitakeover laws, but a much weaker relation (reduced by more than one-third) after the takeover restrictions were in place. Consistent with the Complement Hypothesis, this finding suggests that decreasing board size is more valuable when the market for corporate control is more active.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Nov 8, 2007

There are no references for this article.