Board Effectiveness in Small Firms

Anette Söderqvist () and Karolina Wägar ()
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Anette Söderqvist: Hanken School of Economics
Karolina Wägar: Hanken School of Economics

No 549, Working Papers from Hanken School of Economics

Abstract: Purpose: This study investigates boards of directors in small firms and explores the link between board effectiveness and the composition, roles and working styles of the boards. Design/methodology/approach: The study analyses data from a telephone survey of boards in 45 small firms. The survey included both the CEO and the chairperson of the board. Findings: The study identifies three groups of small firms: ‘paperboards’, ‘professional boards’, and ‘management lead’ boards. Results show that board composition, board roles and board working style influence board effectiveness in small firms. Research limitations/implications: Although the present study has found a link between board effectiveness and the role, composition and working style of boards of small firms, other potentially influential factors are also worthy of investigation; for example, the personal characteristics of the individuals involved, generational factors in family firms, and the situational circumstances of various firms. Practical implications: The study reveals that, in practice, the management team and the board are substantially intertwined in small firms. Originality/value: The main contributions are that the study explores how boards in small firms actually function and gives a detailed account of their composition and roles.More insight into this issue is important given the overemphasis within the governance literature on input-output studies using samples of large publicly listed firms.

Keywords: board of directors; small firms; board effectiveness (search for similar items in EconPapers)
Pages: 25 pages
Date: 2010-03-02
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