• DOI:10.2139/ssrn.605762
• Corpus ID: 67785140

The Determinants of Corporate Board Size and Composition: An Empirical Analysis

@article{Boone2006TheDO,
  title={The Determinants of Corporate Board Size and Composition: An Empirical Analysis},
  author={Audra L. Boone and Laura Casares Field and Jonathan M. Karpoff and Charu G. Raheja},
  journal={ERN: Econometric Studies of Corporate Governance (Topic)},
  year={2006}
}

• Audra L. Boone, Laura Casares Field, +1 author Charu G. Raheja
• Published 1 March 2006
• Business
• ERN: Econometric Studies of Corporate Governance (Topic)

Many theories have been proposed to explain how corporate boards are structured. This paper groups these theories into three hypotheses and tests them empirically. We utilize a unique panel dataset that tracks corporate board development from the time of a firm's IPO through 10 years later. The data indicate that: (i) board size and independence increase as firms grow in size and diversify over time; (ii) board size - but not board independence - reflects a trade-off between the firm-specific benefits of monitoring and the costs of such monitoring; and (iii) board independence is negatively related to the manager's influence and positively related to constraints on such influence. These results are consistent with the view that economic considerations - in particular, the specific nature of the firm's competitive environment and managerial team - help explain cross-sectional variation in corporate board size and composition. Nonetheless, much of the variation in board structures remains unexplained even when all three hypotheses are combined, suggesting that idiosyncratic factors affect many individual boards' characteristics.