Does Optimal Corporate Board Size Exist? An Empirical Analysis

14 Pages Posted: 24 Nov 2015

See all articles by Yixi Ning

Yixi Ning

University of Houston - Victoria - School of Business Administration

Wallace N. Davidson

Southern Illinois University - Department of Finance

Jifu Wang

University of Houston - Victoria

Date Written: November 19, 2015

Abstract

We find that the most common board size for US publicly-traded firms ranges from eight to eleven directors. Over time, small boards (seven or fewer directors), tend to increase their size, but large boards (12 or more directors), tend to shrink their size. This result suggests a significant mean reversion trend in board size over time. We conclude that firms may be motivated by more than just value maximization and resource dependency when selecting board size in practice. It may be the trade-off of the costs and benefits of various board sizes that motivate board size selection.

Suggested Citation

Ning, Yixi and Davidson, Wallace N. and Wang, Jifu, Does Optimal Corporate Board Size Exist? An Empirical Analysis (November 19, 2015). Journal of Applied Finance (Formerly Financial Practice and Education), Vol. 20, No. 2, 2010, Available at SSRN: https://ssrn.com/abstract=2693077

Yixi Ning (Contact Author)

University of Houston - Victoria - School of Business Administration ( email )

2002 W Grand Pkwy
Katy, TX 77449
United States

Wallace N. Davidson

Southern Illinois University - Department of Finance ( email )

Mail Code 4626
Carbondale, IL 62901-4626
United States
618-453-1429 (Phone)
618-453-5626 (Fax)

Jifu Wang

University of Houston - Victoria ( email )

United States

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