Examination of Theoretical and Empirical Studies on Firm’s Performance in Relation to its’ Board Size: A Study of Small and Medium Size Public Firms
This research presented a review of key theoretical and empirical studies on firm’s performance and its board size. The review included on small & medium sized and public owned firms from manufacturing to financial sectors. The research concludes that the evidence on positive or negative correlation between board size and a firm’s performance is mixed (inconclusive) and need for further empirical investigation on this subject is warranted. It was found that the choice of optimal board size can vary in one firm to other, depending on nature of business operations, i.e. for high debt-financed firms with high advisory requirements may require large board to advise CEO on complex matters, as does the banking and saving & loans holding companies where more of expert advice, diversified opinions, professional skills are needed. Also, the firms with poor operating performance may increase their board size as one of their strategy to improve profitability given that new board members will contribute in the form of increased networking, skills, opinion and expert advice.
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