Optimal board member demographics and firm performance.

摘要

This paper focuses on a fundamental element of the corporate governance process, the board of directors. By synthesizing the theory of organizational behaviour, this study identifies optimal board demographics and empirically tests their correlation with firm performance. A sample of 151 firms is used to test the relation of director demographics against Tobin's q, EVA, and ROA. This study suggests that a certain amount of diversity with respect to tenure and age is beneficial in a board and that smaller boards are associated with higher levels of firm performance. Furthermore, board members likely need time to adjust to a board but their contributions will tend to diminish with tenure of excessive levels. Finally, a high proportion of directors who hold outside board positions is associated with decreased firm performance, consistent with current views that directors are stretched too thin. This study argues that board design is related to the firms' ability to create value.