Abstract

http://ssrn.com/abstract=8062
 
 

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Larger Board Size, Decreasing Firm Value, and Increasing Firm Solvency


Theodore Eisenberg


Cornell University - Law School

Stefan Sundgren


Swedish School of Economics and Business Administration

May 1996


Abstract:     
This study finds significant correlations between board size and profitability and between board size and solvency in a sample of small and mid-size firms. Several studies hypothesize a relationship between board size and firm financial performance. Empirical tests of the relationship exist in a few studies of large U.S. firms. We find a negative correlation between board size and profitability in small and mid-size Finnish firms. Finding a board-size effect for a new and different class of firms points towards the influence of group size on risk-taking behavior as a source of the board-size effect. A new board-size effect we report, a positive correlation between board size and firm solvency, further supports the hypothesis that board-size effects result from distortions of risk-taking behavior.

JEL Classification: G32

working papers series





Not Available For Download

Date posted: August 21, 1996  

Suggested Citation

Eisenberg, Theodore and Sundgren, Stefan, Larger Board Size, Decreasing Firm Value, and Increasing Firm Solvency (May 1996). Available at SSRN: http://ssrn.com/abstract=8062

Contact Information

Theodore Eisenberg (Contact Author)
Cornell University - Law School ( email )
524 College Ave
Myron Taylor Hall
Ithaca, NY 14853
United States
607-255-6477 (Phone)
607-255-7193 (Fax)
Stefan Sundgren
Swedish School of Economics and Business Administration ( email )
P.O. Box 287
FI-65100 Vasa
Finland
Feedback to SSRN


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