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...een board size and corporate performance. If larger board size indeed “causes” worse performance, then larger boards would represent inefficient governance that could possibly be improved by a “one size fits all” approach to board size. For example, influential scholars have argued that board size should be no greater than 8 or 9 (Lipton and Lorsch, 1992; and Jensen, 1993) for all firms. Hence the findings have important regulatory implications. 1 However, this interpretation is by no means universally held. A number of recent papers (Lehn et al., 2004; Boone et al., 2007; Coles et al., 2008; Guest, 2008; and Linck et al., 2008) show that board size is determined by firm specific variables, such as Tobin’s Q, profitability and firm size. Since firm performance has a negative impact on board size, previous studies have been heavily criticized for not adequately controlling for endogeneity problems (Wintoki, 2007). To address this, Wintoki (2007) employs a generalized method of moments (GMM) estimator that allows board size to adjust to 3 past performance, and finds no relationship between board size and firm performance. Additionally, since board size is determined by firm specific characteris...

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...nt directors maysadd any economic value to the firm (Kesner et al., 1986; Hermalin and Weisbach,s2003; Petra, 2005). Prior research on board composition mainly focused onsfirms in advanced economies (=-=Guest, 2008-=-). Studies for example by Kaplan andsReishus (1990), Byrd and Hickman (1992), Brickley et al. (1994), and Beasleys(1996) found a positive impact from appointing outside independent directorssonto the ...

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...e more risk information, because the main shareholders can easily obtain it, as they usually have access to that information. Based on agency theory, we formulate our seventh hypothesis as follows: H7. There is a negative relationship between CRD levels in interim reports and institutional ownership. 2.2.2 Board size. Board of directors plays an important role in the CG of publicly listed companies. However, It is argued that UK boards play a much weaker monitoring role as a result of CG soft regulation in the UK which allow firms to choose the board size most appropriate for their own needs (Guest, 2008). Agency theory predicts that larger boards incorporate a variety of expertise which results in more effectiveness in boards’ monitoring role (Singh et al., 2004). Based on that argument; it is predicted that a positive association between board size and CRD, as larger boards’ members would have more incentives to signal their risk management performance to the firm shareholders. Moreover, the large board will help in increasing the number of members who have financial and accounting background, which could affect mangers voluntary disclosure decisions and extend CRD level. Based on agency the...

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...s. However, It is argued that UK boards play a much weakersmonitoring role as a result of CG soft regulation in the UK which allow firms to choose thesboard size most appropriate for their own needs (=-=Guest, 2008-=-). Agency theory predicts thatslarger boards incorporate a variety of expertise which results in more effectiveness in boards’smonitoring role (e.g. Singh et al., 2004). Based on that argument; it is ...

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...entation of outside independent directors may add any economic value to the firm (Kesner et al., 1986; Petra, 2005). Prior research on board composition mainly focused on firms in advanced economies (=-=Guest, 2008-=-). Studies for example by Kaplan and Reishus (1990), Byrd and Hickman (1992), Brickley et al. (1994), and Beasley (1996) found a positive impact from appointing outside independent directors onto the ...

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...CTION When making Initial Public Offering (IPO), a firm will issue prospectus which largely contains information related to financial data. Yet, in IPO setting, manager has strong motivation to opportunistically alter reported earnings, namely earnings management, in an effort to obtain investors’ positive valuation (Healy, 2000). Earnings management is not uncommon in an IPO setting (Friedlan, 1994; Teoh et al, 1998). Following financial scandals in the US in late 1990, stock exchange authorities imposed firms to performed Good Corporate Governance (GCG), including firm wishing to go public. Guest (2008) suggests one of potential aspect in GCG mechanism is the presence of Board of Commissioners (BoC). A well structure BoC is expected to reduce manager opportunistic behavior in performing earnings management. BoC characteristic, in particular its composition, should effectively have contributed to the production of qualified financial reports that will hinder or reduce possibility of financial misrepresentation. Aharony et al. (1993) did not find a strong evidence of earnings management in the US IPOs, but others, such as Friedlan (1994), Neill et al. (1995), Magnan and Cournier (1997) or Teoh...

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...ng into new product lines or new geographic territory have more needs for new directors with specialized knowledge applying to the new growth areas. Furthermore, Coles et al. (2008) argue that leveraged firms depend on external resources to a greater extent and have greater advisory needs for directors with financial expertise to facilitate access to external finance. Therefore, board size is a tradeoff between costs and benefits. In the one hand, larger board size may suffer from impaired coordination and communication problems and thus influence board effectiveness (Lipton and Lorsch, 1992; Guest, 2008, 2009). Further, larger board size also may reduce the board’s ability to oppose the control of top managers due to less candid discussion of managerial performance (Jensen, 1993; Eisenberg et al., 1998). In the other hand, larger boards may benefit firms by offering better advice, which comes from directors’ knowledge, expertise, experience, or their external links (Booth and Deli, 1999; Agrawal and Knoeber, 2001; Carpenter and Westphal, 2001; Güner et al., 2008). Therefore, the prior studies actually yield inconclusive arguments about the board size that facilitates board effectiveness to e...