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Board Size and Firm Value: Evidence from Australia

Pascal Nguyen, Nahid Rahman, Alex Tong () and Ruoyun (Lucy) Zhao ()

No 182, Working Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: We study the effect of board size on firm value in Australia. Using a large sample of Australian firms over the period 2001-2011, we find strong evidence of a negative relationship. We show that firms with a large board are associated with CEO compensation that is sensitive to firm size, but not to firm performance. This incentive to accumulate assets is congruent with the fact that firms with a large board also exhibit lower operating performance and higher operating costs. Furthermore, we find that the effect of board size is stronger in small firms. This result might explain why earlier studies, which focused on large Australian firms, found board size to have little impact on firm value.

Keywords: board of directors; corporate governance; firm performance; CEO compensation (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 G34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eff, nep-hrm and nep-sbm
Date: 2015-07-01
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Published as: Nguyen, P., Rahman, N., Tong, A. and Zhao, R., 2015, "Board Size and Firm Value: Evidence from Australia", Journal of Management and Governance, forthcoming.

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Journal Article: Board size and firm value: evidence from Australia (2016) Downloads
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