1、中文 1835 字 Higher market valuation of companies with a small board of directors(节选 ) Author： David Yermack Nationality： The U.S. Derivation: Journal of Financial Economics 40(1996)185-211 （ P185-187） Introduction A growing body of empirical research examines the structure and effectivenes
2、s of corporate governance systems. An important insight from this literature is that top managers decisions appear to be influenced by executive compensation, take over threats, monitoring by boards of directors, and other control mechanisms. I contribute to this literature by evaluating a proposal
3、for limiting the size of boards of directors in order to improve their effectiveness. My evidence supports this proposal, as I find an inverse association between firm value and board size in a panel of major U.S. companies. Lipton and Lorsch (1992) state that.the norms of behavior in most boardroom
4、s are dysfunctional, because directors rarely criticize the policies of top managers or hold candid discussions about corporate performance. Believing that these problems increase with the number of directors, Lipton and Lorsch recommend limiting the membership of boards to ten people, with a prefer
5、red size of eight or nine. The proposal amounts to a conjecture that even if boards capacities for monitoring increase with board size, the benefits are outweighed by such costs as slower decision-making, less-candid discussions of managerial performance, and biases against risk-taking. Jensen(1993)
6、takes up this theme, pointing out the great emphasis on politeness and courtesy at the expense of truth and frankness in board rooms and stating that when boards get beyond seven or eight people they are less likely to function effectively and are easier for the CEO to control. Some evidence shows t
7、hat reducing board size has become a priority for institutional investors, dissident directors, and corporate raiders seeking to improve troubled companies. Kini et al. (1995) present evidence that board size shrinks after successful tender offers for under-performing firms. At American Express, the
8、 outside director who in 1993 organized the removal of the companys CEO cited theunwieldy19-person board as an obstacle to change, stating that the size of the board does make a difference, according to Monks and Minow (1995).Smaller boards have emerged recently during overhauls of corporate governa
9、nce at such prominent companies as General Motors, IBM, Occidental Petroleum, Scott Paper, W.R. Grace, Time Warner, and Westinghouse Electric. Institutional investor pressure reportedly contributed to many of these changes, such as the 1995 reduction in Graces board from 22 directors to 12. In a sam
10、ple of 452 large U.S. public corporations observed over the period 1984 to 1991, I find an inverse relation between firm market value, as represented by Tobins Q, and the size of the board of directors. The association appears in both cross-sectional analyses of the variation among firms and in time
11、-series analyses of the variation within individual companies. The negative relation between board size and firm value attenuates as boards become large, implying that the greatest incremental costs arise as boards grow from in size from small to medium. The loss in firm value when boards grow from
12、six to 12 members, for example, is estimated to be equal to the value lost when boards grow from 12 to 24.Very few boards have fewer than six or more than 24 directors. A range of additional evidence is consistent with the finding that companies achieve the highest market value when boards are small
13、. Several measures of operating efficiency and profitability are negatively related over time to board size within firms. Smaller boards are more likely to dismiss CEOs following periods of poor performance. Similarly, evidence shows that CEO compensation exhibits greater sensitivity to performance
14、in companies with small boards. Stock returns for a sample of companies announcing significant changes in board size show that investors react positively when boards shrink and negatively when board size increases. The inverse association between board size and firm value proves robust to a variety
15、of tests for alternative explanations. I introduce variables to control for firm size, industry, board composition, inside stock ownership, the presence of growth opportunities, diversification, company age, and different corporate governance structures. None of these modifications changes the concl
16、usion that companies with small boards are valued more highly in the capital markets. An alternative interpretation of the results is that board size arises from prior company performance, with troubled firms adding directors to increase monitoring capacity. I conduct a range of tests to obtain insi
17、ght into the direction of causation between board size and firm value. The tests show that while the rate of director turnover increases following poor performance, board size remains quite stable over time with little sensitivity to performance. （ P209-210） Summary and conclusions This
18、paper evaluates a recent proposal in the legal and finance literature for reducing the size of corporate boards of directors. Lipton and Lorsch (1992) and Jensen(1993)have criticized the performance of large boards, stating that problems of poor communication and decision-making overwhelm the effect
19、iveness of such groups. I find evidence consistent with this theory. Using a variety of regression models with data from 1984-91 for 452 large public corporations, I find an inverse association between board size and firm value. The association appears to have a convex shape, suggesting that the lar
20、gest fraction of lost value occurs as boards grow from small to medium size. The basic result proves robust to a variety of controls for company size, the presence of growth opportunities, and alternative corporate governance and ownership structures. No evidence is consistent with conjectures that
21、companies change board size as a result of past performance. A range of supporting evidence is consistent with the main finding of an inverse association between board size and firm value. Financial ratios related to profitability and operating efficiency appear to decline as board size grows. CEO p
22、erformance incentives provided by the board through compensation and the threat of dismissal operate less strongly as board size increases. A small group of sample companies that announce significant reductions in board size realize substantial excess stock returns around the announcement dates, while the opposite occurs for companies that announce board expansions.
