Does Corporate Board Downsizing Increase Shareholder Value? Evidence from Japan
Posted: 26 Aug 2009 Last revised: 20 Oct 2010
Date Written: October 19, 2010
Japanese firms that have traditionally had large boards have recently become subject to pressures for small boards. This study shows that Japanese firms that substantially decreased board size tended to adopt an officer system and so did not substantially decrease the size of the management team (executive officers and directors). This tendency is especially evident for high-performing firms that face less information asymmetry. Japanese firms endogenously choose the change in the management team size when downsizing their boards. Firms that downsize boards do not show performance improvements, suggesting that board downsizing does not necessarily raise shareholder value.
Keywords: Corporate governance, Board size, Officer system, Firm performance
JEL Classification: G32, G34
Suggested Citation: Suggested Citation