Does Optimal Corporate Board Size Exist? An Empirical Analysis

Abstract

We find that the most common board size for US publicly-traded firms ranges from eight to eleven directors. Over time, small boards (seven or fewer directors), tend to increase their size, but large boards (12 or more directors), tend to shrink their size. This result suggests a significant mean reversion trend in board size over time. We conclude that firms may be motivated by more than just value maximization and resource dependency when selecting board size in practice. It may be the trade-off of the costs and benefits of various board sizes that motivate board size selection.