The Determinants of Board Structure

45 Pages Posted: 30 May 2005 Last revised: 4 Mar 2018

See all articles by James S. Linck

James S. Linck

Southern Methodist University (SMU) - Finance Department

Jeffry M. Netter

Department of Finance; University of Georgia Law School

Tina Yang

University of South Florida

Date Written: March 23, 2007

Abstract

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

Linck, James S. and Netter, Jeffry M. and Yang, Tina, The Determinants of Board Structure (March 23, 2007). Journal of Financial Economics (JFE), No. 87, 2008. Available at SSRN: https://ssrn.com/abstract=729935 or http://dx.doi.org/10.2139/ssrn.729935

James S. Linck (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States

Jeffry M. Netter

Department of Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States
706-542-4450 (Phone)

HOME PAGE: http://www.terry.uga.edu/directory/profile/jnetter/

University of Georgia Law School

225 Herty Drive
Athens, GA 30602
United States

Tina Yang

University of South Florida ( email )

140 7th Ave S
St. Petersburg, FL 33701
United States
7278734568 (Phone)

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