Firms’ performance and board size: A simultaneous approach in the European and American contexts

Abstract

The relation between performance and board size is analyzed in the American and European contexts. It is found that return on assets (ROA) depends on board size (BS) defined as an endogenous explanatory variable. This potentially non-monotonous effect is modeled by introducing firm size and number of segments by board member as explanatory variables for ROA. BS net effect after accounting for the indirect effect resulting from these variables is negative. Differences in the results obtained for Tobin’s Q, strategic investors’ weight, and equity to total assets, between America and Europe, suggest a more preventive management control in Europe.