This paper uses legal board size requirements to test whether board size affects firm performance and value. Since 1976, the minimum size of German firms’ supervisory boards increases from 12 to 16 directors at 10,000 domestic employees, resulting in a sharp increase in board sizes.
Regression discontinuity analyses show that ROA and Tobin’s Q decline by 2-3 percentage points and 0.20, respectively, at the threshold. A difference-in-differences analysis around the law’s introduction shows similar effects. Large boards’ underperformance is persistent, not just a transitory effect of adding directors, and large boards are associated with lower profit margins and M&A announcement returns.
We study the market for CEOs of large publicly-traded US firms, analyze new CEOs’ prior connections to the hiring firm, and explore how hiring choices...
What makes independent directors perform their monitoring duty? One possible reason is that they are concerned about being sanctioned by regulators if...
This paper reviews the theoretical and empirical literature on executive compensation. We start by presenting data on the level of CEO and other top...