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EVIDENCE ON BOARD SIZE AND INFORMATION ASYMMETRY: A CAPITAL MARKETS PERSPECTIVE
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Susan Flaherty, Joanne Li, Kenneth Small 
Abstract
We examine the relation of board size with market liquidity and adverse selection costs using a sample of Fortune 200 companies. After controlling for firm specifics, equity characteristics, and ratio of insiders, we find a direct relation between board size and equity market liquidity. Our findings indicate that board size is positively and significantly related to dollar depth but has no impact on bid-ask spreads. Furthermore, using the adverse selection component of the bid-ask spread as a proxy for transparency, we find that larger boards reduce information asymmetries, but the ratio of insiders to total board members has no impact on informational asymmetries.
Keywords: Board Size, Corporate Governance, Market Liquidity, Information Asymmetry
How to cite this paper: Flaherty, S., Li, J., & Small, K. (2007). Evidence on board size and information asymmetry: A capital markets perspective. Corporate Ownership & Control, 4(2-2), 248-256. https://doi.org/10.22495/cocv4i2c2p1
