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

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.

The Effect of Board Composition and Financial Performance of Financial Services Firms in the Nigerian Stock Exchange Market

“…Significant association exists between CEO duality and Tobin Q, and between CEO duality and ROE but in adverse mode. Same type of finding is revealed by Kalsie & Shrivastav (2016) where board opus and firm recital are statistically associated.…”

“…Based on a study on Nairobi Securities Exchange, Ngulumbu & Aduda found the connection between board opus and financial recital; 'Corporate governance practice dictated the financial performance of listed organisations, uncovered that there was an expanding pattern inboard size, independent directors, number of board advisory groups, number of founder directors, gender-mix, level of training of executives and age of the executives over the three years. They finally concluded that the independent directors did an excellent job of predicting profitability' (2016:72)" Kalsie & Shrivastav (2016), in their study, examined the relationship between board composition and firm performance and stated that while stakeholder theory and agency theory suggest that board composition positively affects performance, other factors contribute to corporate performance and not only board composition. While Jensen, (1993:831) claims that; "good corporate structure provides firms with greater access to finance, lower cost of capital, improved performance and adequate treatment of all stakeholders likewise the shareholders."…”

“…While Jensen, (1993:831) claims that; "good corporate structure provides firms with greater access to finance, lower cost of capital, improved performance and adequate treatment of all stakeholders likewise the shareholders." Kalsie & Shrivastav (2016) suggested that larger boards tend to be less efficient and effective than smaller boards as they believed that a large board will always drive towards symbolism, rather than them performing their function as a management group (AlQudah, et al, 2019;Ayorinde et al, 2012;Yermack (1996). Orozco et al, an empirical study of 117 non-financial listed manufacturing firms claimed that; 'There is no significant relationship between board size and corporate performance irrespective of accounting-based measurements and economy-based measures, and therefore resolved that larger board size tends to have diminishing influence on the overall performance of a firm.…”

An international approach of the relationship between board attributes and the disclosure of corporate social responsibility issues

“…Large boards may benefit firms in several ways, such as providing increases in firm value (Kalsie & Shrivastav, 2016) or a higher quality of financial reporting (Obigbemi, Omolehinwa, Mukoro, Ben-Caleb, & Olusanmi, 2016), among others. Thus, one of the attributes that makes boards effective in the sense of pressuring the management team to disclose CSR issues is their size (Jizi et al, 2014).…”

Peranan Bank-Firm Relationship Dalam Meningkatkan Kinerja Perusahaan Nonkeuangan

“…Dengan tingkat signifikansi 5 persen, ukuran perusahaan (firm size) yang dilihat dari logaritma total aset berpengaruh se cara negatif dan signifikan terhadap kiner ja perusahaan yang diproksikan oleh ROA dan ROTA. Sejumlah peneliti berargumen tasi bahwa ukuran perusahaan dan kiner ja perusahaan mempunyai pengaruh nega tif karena adanya disekonomis skala atau masalah agensi yang memburuk (Dang, Li, & Yang, 2018;Kalsie & Shrivastav, 2016;Vithessonthi & Tongurai, 2015;Yook, Choi, & Suresh, 2018). Adanya pengaruh nega tif antara ukuran perusahaan dengan kin erja menurut Belenzon & Patacconi (2014) dan Lahiri & Narayan (2013) terjadi karena adanya pemisahan kepemilikan dari mana jemen di perusahaan modern di mana tu juan manajer yang tadinya memaksimalkan keuntungan beralih ke tujuan untuk me maksimalkan utilitas manajerial.…”