Analysis of Board Size and Firm Performance: Evidence from NSE Companies Using Panel Data Approach

Anjala Kalsie · Shikha Mittal Shrivastav

127 citations0/0 files storedIndian Journal of Corporate Governance

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Corporate Finance and Governance Gender Diversity and Inequality Corporate Governance and Financial Management

Abstract

This article seeks to examine the relationship between the board size and firm performance. Existing literature on board size is based on different theories of corporate governance. While agency theory and resource dependency theory suggest that the board size positively affects performance, stewardship theory favours smaller board size and argues that larger board size negatively impacts the firm performance. The present article adds to the empirical literature by employing panel data analysis of 145 non-financial companies listed in the NSE CNX 200 Index of India corresponding to 16 industries. The study is carried out for a period of five years from 2008 to 2012. The firm performance has been measured using Tobin’s Q and the market-to-book value ratio (MBVR) as market-based measures and return on assets (ROA) and return on capital employed (ROCE) as accounting-based measures. The fixed effect model, random effect model and feasible generalised least square (FGLS) regression models are applied to achieve the above-mentioned objectives. The results conclude that the board size has a positive and significant impact on the firm performance.

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References

1983Separation of Ownership and Control 1993The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems 1996Higher market valuation of companies with a small board of directors 2007Boards: Does one size fit all☆1996Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders 1992A Modest Proposal for Improved Corporate Governance 2000Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups 2001Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature

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