Do Firms Adjust Corporate Governance in Response to Economic Policy Uncertainty? Evidence From Board Size

22 Pages Posted: 23 Jun 2020

See all articles by Viput Ongsakul

Viput Ongsakul

NIDA Business School, National Institute of Development Administration (NIDA)

Sirimon Treepongkaruna

The University of Western Australia; Financial Research Network (FIRN)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Ali Uyar

La Rochelle Business School

Date Written: May 30, 2020

Abstract

Prior research shows that board size has a significant effect on firm performance. Therefore, board size is a crucial aspect of the board of directors. We investigate how firms adjust board size in response to economic policy uncertainty (EPU). We find that firms reduce board size in the presence of EPU. In particular, a rise in EPU by one standard deviation reduces board size by 21.61% on average. Our results are consistent with the notion that agency conflicts are more severe in the presence of EPU. Accordingly, firms strengthen their corporate governance by reducing board size.

Keywords: board size, economic policy uncertainty, corporate governance, board of directors

JEL Classification: E66, M21, G34

Suggested Citation

Ongsakul, Viput and Treepongkaruna, Sirimon and Jiraporn, Pornsit and Uyar, Ali, Do Firms Adjust Corporate Governance in Response to Economic Policy Uncertainty? Evidence From Board Size (May 30, 2020). Available at SSRN: https://ssrn.com/abstract=3614259 or http://dx.doi.org/10.2139/ssrn.3614259

Viput Ongsakul

NIDA Business School, National Institute of Development Administration (NIDA) ( email )

118 Seri Thai Road
Bangkok, 10240
Thailand

Sirimon Treepongkaruna

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
+61864887853 (Phone)
+61864881086 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Ali Uyar

La Rochelle Business School ( email )

102 rie de Coureilles
Les Minimes
La Rochelle, 17024
France

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