Board size and firm value

Abstract: The purpose of this thesis is to investigate whether the size of the board has any impact on firm value, which is represented by Tobin’s q. The study is limited to Swedish firms listed on the A-list and Attract 40. The purpose is also to augment the understanding of the financial analysts’ valuation process with respect to board size. We find a negative relation between firm value represented by Tobin’s q and board size. As boards grow larger and hence gain more competence, it does not necessarily imply that the control function improves. We find that financial analysts in Sweden do not consider board size at all in their valuation process. Instead they focus on the people having a chair on the board, if they consider the board at all. Our final conclusion is that board size has an impact on firm value and investors should take it into consideration when deciding on an investment.