Non-linear relationship between board size and performance of Indian companies

Renuka Sharma (), Kiran Mehta () and Archana Goel ()
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Renuka Sharma: Chitkara University
Kiran Mehta: Chitkara University
Archana Goel: Chitkara University

Journal of Management & Governance, 2023, vol. 27, issue 4, No 8, 1277-1301

Abstract: Abstract Several authors have stated that the board of directors serve as the most crucial internal mechanism for improving a company’s performance. On the other hand, prior studies argue that the board did not serve its purpose of safeguarding the stakeholders’ interests equally and improving the performance of companies. It has piqued the interest of regulatory organisations all around the world, including in India. However, out of the several reforms introduced in India, board size is one of the most significant. As a result, the present study scrutinises the non-linear influence of board size on the performance of 213 Indian companies for 2001–2019. Tobin’s Q and Return on Equity (ROE) are the study’s performance metrics. The fixed effect panel regression findings depict that board size has an inverted U-shaped non-linear impact, i.e., initially, the performance improves, but after board size reaches a particular point, it diminishes. Thus, this study supports the recent changes made by the regulatory bodies about board size.

Keywords: Board size; Corporate Governance; Firm performance; The board of directors; Non-Linear (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10997-022-09651-8

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