BOARD SIZE AND FIRM PERFORMANCE: A COMPARATIVE AND COMPREHENSIVE ANALYSIS BY USING ORGANIZATIONAL THEORIES AND CORRECT PROXIES
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Kashif Rashid 
, Sardar M. N. Islam
Abstract
An organization’s board is an important governance mechanism to incorporate corporate governance provisions in financial markets. Previous studies on board size and the value of a firm relationship (BVF) are inconclusive and lack a comparative and comprehensive analysis of this relationship which incorporates the role of additional factors present in the developing financial market. This study bridges the gap in the literature by providing some additional empirical evidence about the BVF relationship. This evidence is provided by performing a comparative and comprehensive analysis of the firms in developing and developed financial markets. Based on a sophisticated data set for the selected markets, two separate models are run and their results are compared. The results for this study suggest that in the developing market a bigger board improves the value of a firm, supporting the relevance of stewardship theory. On the contrary, in the developed market a smaller board improves shareholders’ value, supporting the agency theory. The study has reflected the differences in the efficiency of institutional framework and the sophistication of financial development in a selection of countries, in the results on the BVF relationship. Furthermore, these results make the applicability of different business theories explaining market operations in these markets different from each other. The results are innovative and valuable to academics, analysts and industry professionals in both developing and developed financial markets.
Keywords: Developing markets, Developed markets, Board size, Value of firm and CEO duality
How to cite this paper: Rashid, K., & Islam, S. M. N. (2010). Board size and firm performance: A comparative and comprehensive analysis by using organizational theories and correct proxies. Corporate Board: role, duties and composition, 6(2), 35-52. https://doi.org/10.22495/cbv6i2art3
