Publication: Using demographic identification to estimate the effects of board size on corporate performance
Issued Date
2017-06-25
Resource Type
ISSN
14664291
13504851
13504851
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2-s2.0-84986184210
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Mahidol University
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SCOPUS
Bibliographic Citation
Applied Economics Letters. Vol.24, No.11 (2017), 766-770
Suggested Citation
Pandej Chintrakarn, Pornsit Jiraporn, Shenghui Tong, Richard M. Proctor Using demographic identification to estimate the effects of board size on corporate performance. Applied Economics Letters. Vol.24, No.11 (2017), 766-770. doi:10.1080/13504851.2016.1226484 Retrieved from: https://repository.li.mahidol.ac.th/handle/123456789/42490
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Title
Using demographic identification to estimate the effects of board size on corporate performance
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Abstract
© 2016 Informa UK Limited, trading as Taylor & Francis Group. Motivated by agency theory, we investigate the effect of board size on corporate outcomes. To address endogeneity, we exploit the variations in the director-age populations across the states in the US. We argue that firms with access to a larger pool of potential directors tend to have larger boards. Consistent with this notion, our empirical results show that firms located where the size of the director-age population is larger have significantly larger board size. Because the director-age population represents broad demographic trends outside of any firm’s control, it is unlikely related to firm outcomes or policies and should be exogenous. Using the director-age population as our instrument, we estimate the effects of board size on firm value and profitability. Our approach is less vulnerable to endogeneity and is more likely to show a causal effect.