Board Size and the Variability of Corporate Performance

Posted: 3 Sep 2007

See all articles by Shijun Cheng

Shijun Cheng

Shanghai Advanced Institute of Finance (SAIF), Shanghai Jiao Tong University

Abstract

This study provides empirical evidence that firms with larger boards have lower variability of corporate performance. The results indicate that board size is negatively associated with the variability of monthly stock returns, annual accounting return on assets, Tobin's Q, accounting accruals, extraordinary items, analyst forecast inaccuracy, and R&D spending, the level of R&D expenditures, and the frequency of acquisition and restructuring activities. The results are consistent with the view that it takes more compromises for a larger board to reach consensus, and consequently, decisions of larger boards are less extreme, leading to less variable corporate performance.

Keywords: Boards of directors, Corporate governance

JEL Classification: G34, G12, G24, M41, M43, K22

Suggested Citation

Cheng, Shijun, Board Size and the Variability of Corporate Performance. Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=1009241

Shijun Cheng (Contact Author)

Shanghai Advanced Institute of Finance (SAIF), Shanghai Jiao Tong University ( email )

211 West Huaihai Road
Shanghai, 200030
China

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