TY - JOUR
T1 - Do firms adjust corporate governance in response to economic policy uncertainty? Evidence from board size
AU - Ongsakul, Viput
AU - Treepongkaruna, Sirimon
AU - Jiraporn, Pornsit
AU - Uyar, Ali
N1 - Publisher Copyright:
© 2020 Elsevier Inc.
PY - 2021/3
Y1 - 2021/3
N2 - Prior research shows that board size has a significant effect on firm performance. Therefore, board size is a crucial aspect of the board of directors. Drawing on institutional theory, we investigate how firms adjust board size in response to economic policy uncertainty (EPU). We find that firms reduce board size in the presence of EPU. In particular, a rise in EPU by one standard deviation reduces board size by 21.61% on average. Our results are consistent with the notion that agency conflicts are more severe in the presence of EPU. Accordingly, firms strengthen their corporate governance by reducing board size.
AB - Prior research shows that board size has a significant effect on firm performance. Therefore, board size is a crucial aspect of the board of directors. Drawing on institutional theory, we investigate how firms adjust board size in response to economic policy uncertainty (EPU). We find that firms reduce board size in the presence of EPU. In particular, a rise in EPU by one standard deviation reduces board size by 21.61% on average. Our results are consistent with the notion that agency conflicts are more severe in the presence of EPU. Accordingly, firms strengthen their corporate governance by reducing board size.
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U2 - 10.1016/j.frl.2020.101613
DO - 10.1016/j.frl.2020.101613
M3 - Article
AN - SCOPUS:85086019159
SN - 1544-6123
VL - 39
JO - Finance Research Letters
JF - Finance Research Letters
M1 - 101613
ER -