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Determinants of the Size and Structure of Corporate Boards: 1935-2000

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Author Info
Lehn, Kenneth
Patro, Sukesh
Zhao, Mengxin
Abstract

We argue that the size and composition of corporate boards are determined by tradeoffs involving the information that directors bring to boards versus the coordination costs and free rider problems associated with their additions to boards. Our hypotheses lead to predictions that firm size and growth opportunities are important determinants of these board characteristics. Using a sample of 82 U.S. firms that survived over the period of 1935 through 2000, we find strong support for the hypotheses. The hypotheses also find support in the relation between changes in board size and firms' merger and divestiture activity, and changes in the geographical diversification of firms. We find no robust relation between firm performance and either board size or composition after accounting for the determinants of these board characteristics.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/15748/1/WP2008-13a.pdf
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Publisher Info
Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2008-13.

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Length: 53 p.
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:hit:hitcei:2008-13

Note: December, 2007
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Related research
Keywords: Board size; board composition; mergers and acquisitions; firm size; growth opportunities; diversification; geographical diversification; firm performance; endogeneity;

Find related papers by JEL classification:
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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