THE EFFECT OF BOARD SIZE ON FIRM PERFORMANCE AND HOW THIS RELATIONSHIP IS INFLUENCED BY UNCERTAINTY AVOIDANCE

Abstract: This study investigates the effect of board size on firm performance measured through return on assets. Furthermore, this study investigates how this relationship is influenced by uncertainty avoidance. An unbalanced global sample of more than 9,000 observations divided over 23 countries for the time period 2006 – 2016 is used to examine this. In contrast with other studies a global sample is used and a new variable, uncertainty avoidance is added. In the study, I find that board size positively affects firm performance. Furthermore, I find that uncertainty avoidance affects the relationship between board size and firm performance. Although in contrast with other studies, my evidence supports the argument that firms should increase their board size to reduce agency costs and increase board capital.