Title: The impact of board size on firm performance: evidence from the UK.Authors: Guest, Paul M.1 paul.guest@cranfield.ac.ukSource: European Journal of Finance; Jun2009, Vol. 15 Issue 4, p385-404, 20pDocument Type: ArticleSubject Terms: *FINANCIAL performance
*BUSINESS enterprises
*PROFITABILITY
*DECISION making
*CORPORATE governance
*BUSINESS communication
*ECONOMETRIC models
*CORPORATE profitsGeographic Terms: GREAT BritainAuthor-Supplied Keywords: board size
corporate governance
endogeneity
firm performance
UKAbstract: We examine the impact of board size on firm performance for a large sample of 2746 UK listed firms over 1981-2002. The UK provides an interesting institutional setting, because UK boards play a weak monitoring role and therefore any negative effect of large board size is likely to reflect the malfunction of the board's advisory rather than monitoring role. We find that board size has a strong negative impact on profitability, Tobin's Q and share returns. This result is robust across econometric models that control for different types of endogeneity. We find no evidence that firm characteristics that determine board size in the UK lead to a more positive board size-firm performance relation. In contrast, we find that the negative relation is strongest for large firms, which tend to have larger boards. Overall, our evidence supports the argument that problems of poor communication and decision-making undermine the effectiveness of large boards. [ABSTRACT FROM AUTHOR] Copyright of European Journal of Finance is the property of Routledge and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)Author Affiliations: 1Cranfield School of Management, Cranfield University, Cranfield MK34 OAL, UK.ISSN: 1351-847XDOI: 10.1080/13518470802466121Accession Number: 40627307