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http://ssrn.com/abstract=605762
 
 

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The Determinants of Corporate Board Size and Composition: An Empirical Analysis


Audra L. Boone


Texas A&M University - Department of Finance

Laura Casares Field


Pennsylvania State University - Smeal College of Business

Jonathan M. Karpoff


University of Washington - Michael G. Foster School of Business

Charu G. Raheja


Wake Forest University

March 2006

AFA 2005 Philadelphia Meetings

Abstract:     
Many theories have been proposed to explain how corporate boards are structured. This paper groups these theories into three hypotheses and tests them empirically. We utilize a unique panel dataset that tracks corporate board development from the time of a firm's IPO through 10 years later. The data indicate that: (i) board size and independence increase as firms grow in size and diversify over time; (ii) board size - but not board independence - reflects a trade-off between the firm-specific benefits of monitoring and the costs of such monitoring; and (iii) board independence is negatively related to the manager's influence and positively related to constraints on such influence. These results are consistent with the view that economic considerations - in particular, the specific nature of the firm's competitive environment and managerial team - help explain cross-sectional variation in corporate board size and composition. Nonetheless, much of the variation in board structures remains unexplained even when all three hypotheses are combined, suggesting that idiosyncratic factors affect many individual boards' characteristics.

Number of Pages in PDF File: 59

Keywords: Boards of Directors, IPOs, Ownership Evolution

JEL Classification: G24, G30, G32

working papers series





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Date posted: October 18, 2004 ; Last revised: October 18, 2011

Suggested Citation

Boone, Audra L. and Field, Laura Casares and Karpoff, Jonathan M. and Raheja, Charu G., The Determinants of Corporate Board Size and Composition: An Empirical Analysis (March 2006). AFA 2005 Philadelphia Meetings. Available at SSRN: http://ssrn.com/abstract=605762 or http://dx.doi.org/10.2139/ssrn.605762

Contact Information

Audra Boone
Texas A&M University (TAMU) - Department of Finance ( email )
430 Wehner
College Station, TX 77843-4218
United States

Laura Casares Field (Contact Author)
Pennsylvania State University - Smeal College of Business ( email )
609D BAB I
University Park, PA 16802
United States
818-865-1483 (Phone)
818-865-3362 (Fax)
Jonathan M. Karpoff
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
206-685-4954 (Phone)
206-221-6856 (Fax)
Charu G. Raheja
Wake Forest University ( email )
P.O. Box 7659
Winston-Salem, NC 27109-7659
United States
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