Do firms adjust corporate governance in response to economic policy uncertainty? Evidence from board size

Viput Ongsakul, Sirimon Treepongkaruna, Pornsit Jiraporn, Ali Uyar

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish (US)
Article number101613
JournalFinance Research Letters
DOIs
StateAccepted/In press - 2020

All Science Journal Classification (ASJC) codes

  • Finance

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