Finance Discipline Group
UTS Business School
University of Technology, Sydney

Working Paper Series

Board Size and Firm Value: Evidence from Australia
Author(s): Pascal Nguyen, Nahid Rahman, Alex Tong and Ruoyun Zhao
Date of publication: July 2015
Working paper number: 182
We study the effect of board size on firm value in Australia. Using a large sample of Australian firms over the period 2001-2011, we find strong evidence of a negative relationship. We show that firms with a large board are associated with CEO compensation that is sensitive to firm size, but not to firm performance. This incentive to accumulate assets is congruent with the fact that firms with a large board also exhibit lower operating performance and higher operating costs. Furthermore, we find that the effect of board size is stronger in small firms. This result might explain why earlier studies, which focused on large Australian firms, found board size to have little impact on firm value.
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Comments: Published as: Nguyen, P., Rahman, N., Tong, A. and Zhao, R., 2015, "Board Size and Firm Value: Evidence from Australia", Journal of Management and Governance, forthcoming.