Browsing Working Papers (ECON) by Author "Kongsted, Hans Christian"
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Bennedsen, Morten; Kongsted, Hans Christian; Meisner Nielsen, Kasper (København, 2004)[More information][Less information]
Abstract: Previous work on board size effects in closely held corporations has established a negative correlation between board size and firm performance. We argue that this work has been incomplete in analysing the causal relationship due to lack of ownership information and weak identification strategies in simultanous equation analysis. In the present paper we reexamine the causal relationship between board size and firm performance using a dataset of more than 5,000 small and medium sized closely held corporations with complete ownership information and detailed accounting data. We test the potential endogeneity of board size by using a new instrument given by the number of children of the founders of the firms. Our analysis shows that board size can be taken as exogenous in the performance equation. Furthermore, based on a flexible model specification we find that there is no empirical evidence of adverse board size effects in the typical range of three to six board members. Finally, we find a significantly negative board size effect in the minority of closely held firms which have comparatively large boards of seven or more members. URI: http://hdl.handle.net/10398/7566 Files in this item: 1
wpec092004.pdf (252.8Kb) -
Kongsted, Hans Christian; Meisner Nielsen, Kasper; Bennedsen, Morten (København, 2007)[More information][Less information]
Abstract: Boards are endogenously chosen institutions determined by observable and unobservable firm characteristics. Empirical studies of large publicly traded firms have successfully controlled for observable determinants of board size and shown a robust negative relationship between board size and firm performance. The evidence on smaller closely held firms is less clear; we argue that existing work has been incomplete in analyzing the causal relationship due to weak identification strategies. Using a rich data set of almost 6,000 small and medium-sized closely held corporations we provide a causal analysis of board size effects on firm performance using a novel instrument given by the number of children of the founders of the firms. First, we find no empirical evidence of adverse board size effects when the size of the board lies in the typical range for closely held corporations of three to six directors. Second, we find a significantly negative board size effect for the minority of closely held firms that are characterized by having comparatively large boards of seven or more members and non-complex operations. URI: http://hdl.handle.net/10398/7600 Files in this item: 1
wp14-2007.pdf (428.8Kb)
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