Does Board Voting Efficiency Affect Corporate Performance and Governance? Evidence from the Even-Odd Effects of Corporate Board

63 Pages Posted: 19 Jul 2012 Last revised: 30 Nov 2021

See all articles by Xin Deng

Xin Deng

Nanyang Technological University

Huasheng Gao

Fanhai International School of Finance, Fudan University

Wei-Lin Liu

School of Finance, Shanghai University of Finance and Economics (SUFE)

Date Written: November 12, 2012

Abstract

We analyze a simple model of board voting and find that in comparison to boards with an even number of directors (even boards), those with an odd number of directors (odd boards) improve voting efficiency by better aggregating directors’ information. Consistent with the model’s implications, our empirical analysis reveals that firms with an odd board derive higher Tobin’s Q, deliver better operating performance, exhibit stronger Chief Executive Officer (CEO) turnover-performance sensitivity, and have lower CEO compensation but higher CEO pay-performance sensitivity, than do firms with an even board. Furthermore, these even-odd effects diminish as board size increases. Overall, our findings are consistent with the even-odd characteristic of board playing an important role in influencing board voting efficiency and thus the quality of board decisions.

Keywords: voting efficiency, odd boards, even boards, firm performance, corporate governance, CEO turnover, CEO compensation

JEL Classification: G32, G34, K22

Suggested Citation

Deng, Xin and Gao, Huasheng and Liu, Wei-Lin, Does Board Voting Efficiency Affect Corporate Performance and Governance? Evidence from the Even-Odd Effects of Corporate Board (November 12, 2012). Available at SSRN: https://ssrn.com/abstract=2112880 or http://dx.doi.org/10.2139/ssrn.2112880

Xin Deng

Nanyang Technological University ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

Huasheng Gao (Contact Author)

Fanhai International School of Finance, Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China
2165642222 (Phone)
2165642222 (Fax)

Wei-Lin Liu

School of Finance, Shanghai University of Finance and Economics (SUFE) ( email )

Shanghai, 200433
China

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