Firms’ performance and board size: A simultaneous approach in the European and American contexts

ABSTRACT

The relation between performance and board size (BS) is analysed in the American and European contexts. It is found that return on assets (ROA) depends on BS defined as an endogenous explanatory variable. This potentially non-monotonous effect is modelled by introducing firm size and number of segments by board member as explanatory variables for ROA. BS net effect after accounting for the indirect effect resulting from these variables is negative. Differences in the results obtained for Tobin’s Q, strategic investors’ weight and equity to total assets, between America and Europe, suggest a more preventive management control in Europe.

KEYWORDS:

• Board size
• board structure
• firms’ performance
• firms’ complexity
• management control

JEL CLASSIFICATION:

• G30
• G34
• G39
• C30

Disclosure statement

No potential conflict of interest was reported by the authors.