The relation between board size and firm performance in firms with a history of poor operating performance

The relation between board size and firm performance in firms with a history of poor operating... Focusing on a sample of smaller firms with a history of poor operating performance, this paper posits that increases in board size will be associated with better share price performance. Notably, board sizes studied here are, on average, much smaller than those typically studied by prior research. Mostly consistent with predictions, board size is found to be positively correlated with firm value in between-firms tests, and changes in board size are found to be positively associated with annual stock returns. Last, event study results suggest that the market responds favorably to board size increases and unfavorably to large board size decreases. Together, these results identify a setting in which larger board sizes appear to be positively related to shareholder value. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Management & Governance Springer Journals

The relation between board size and firm performance in firms with a history of poor operating performance

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Publisher
Springer Journals
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC.
Subject
Business and Management; Management; Accounting/Auditing; Industrial Organization; Sociology, general
ISSN
1385-3457
eISSN
1572-963X
DOI
10.1007/s10997-009-9091-z
Publisher site
See Article on Publisher Site

Abstract

Focusing on a sample of smaller firms with a history of poor operating performance, this paper posits that increases in board size will be associated with better share price performance. Notably, board sizes studied here are, on average, much smaller than those typically studied by prior research. Mostly consistent with predictions, board size is found to be positively correlated with firm value in between-firms tests, and changes in board size are found to be positively associated with annual stock returns. Last, event study results suggest that the market responds favorably to board size increases and unfavorably to large board size decreases. Together, these results identify a setting in which larger board sizes appear to be positively related to shareholder value.

Journal

Journal of Management & GovernanceSpringer Journals

Published: Mar 24, 2009

References

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