The Determinants of Board Structure
45 Pages Posted: 30 May 2005
Date Written: March 23, 2007
Using a comprehensive sample of nearly 7,000 firms from 1990 to 2004, this paper examines corporate board structure, its trends, and its determinants. We study how board structure has evolved over time and, more importantly, we compare board structure across small and large firms in ways suggested by recent theoretical work. Overall, our evidence suggests that firms structure their boards in response to the costs and benefits of the board's monitoring and advising roles. Our models explain as much as 45% of the observed variation in board structure. Further, small and large firms have dramatically different board structures. For example, board size was falling in the 1990s for large firms, a trend that reversed at the time of mandated reforms, while board size was relatively flat over the 1990s for small and medium-sized firms.
Keywords: Board composition, board size, board leadership, duality, endogeneity, SOX, Sarbanes-Oxley, corporate governance
JEL Classification: G32, G34, G38, K22
Suggested Citation: Suggested Citation