Corporate Boards in OECD Countries: Size, Composition, Functioning and Effectiveness

14 Pages Posted: 20 Mar 2005

See all articles by Pablo de Andrés

Pablo de Andrés

Universidad Autonoma de Madrid; ECGI

Valentin Azofra-Palenzuela

University of Valladolid - Department of Finance and Accounting

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Abstract

In recent years, the debate about the efficiency of corporate governance mechanisms has focused on the activity of the corporate boards of directors. This paper analyses the effect of the size of the board, its composition and internal functioning on firm value in a sample of 450 non-financial companies from ten countries in Western Europe and North America. The econometric method combines uniequational regression analysis with simultaneous equations in order to control for the possibility of board size and composition endogeneity. The results show a negative relationship between firm value and the size of the board of directors. This relation holds when we control for alternative definitions of firm size and for board composition, the board's internal functioning, country effect and industry effect. We find no significant relationship between the composition of the board and the value of the firm. These results are consistent with previous relevant papers and show that companies with oversized boards of directors have poorer performance both in countries where internal mechanisms of governance dominate and in countries where external mechanisms are predominant.

Suggested Citation

Andrés, Pablo de and Azofra-Palenzuela, Valentin and Lopez-Iturriaga, Felix Javier, Corporate Boards in OECD Countries: Size, Composition, Functioning and Effectiveness. Corporate Governance: An International Review, Vol. 13, No. 2, pp. 197-210, March 2005. Available at SSRN: https://ssrn.com/abstract=684310

Pablo de Andrés

Universidad Autonoma de Madrid ( email )

Campus de Cantoblanco
C/ Francisco Tomás y Valiente, 5
Madrid, Madrid 28049
Spain
+34 91 497 6527 (Phone)
+34 91 497 3954 (Fax)

HOME PAGE: http://www.uam.es

ECGI

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Valentin Azofra-Palenzuela

University of Valladolid - Department of Finance and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain

Felix Javier Lopez-Iturriaga (Contact Author)

University of Valladolid - Department of Financial Economics and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

HOME PAGE: http://www2.eco.uva.es/flopez

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

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