Journal of Management & Governance

, 14:61

The relation between board size and firm performance in firms with a history of poor operating performance

Authors

  • Sofia Larmou
    • Bank of Cyprus
    • Department and Public and Business AdministrationUniversity of Cyprus
Article

DOI: 10.1007/s10997-009-9091-z

Cite this article as:
Larmou, S. & Vafeas, N. J Manag Gov (2010) 14: 61. doi:10.1007/s10997-009-9091-z

Abstract

Focusing on a sample of smaller firms with a history of poor operating performance, this paper posits that increases in board size will be associated with better share price performance. Notably, board sizes studied here are, on average, much smaller than those typically studied by prior research. Mostly consistent with predictions, board size is found to be positively correlated with firm value in between-firms tests, and changes in board size are found to be positively associated with annual stock returns. Last, event study results suggest that the market responds favorably to board size increases and unfavorably to large board size decreases. Together, these results identify a setting in which larger board sizes appear to be positively related to shareholder value.

Keywords

Board sizeFirm performance

Copyright information

© Springer Science+Business Media, LLC. 2009