We examine the relation of board size with market liquidity and adverse selection costs using a sample of Fortune 200 companies. After controlling for firm specifics, equity characteristics, and ratio of insiders, we find a direct relation between board size and equity market liquidity. Our findings indicate that board size is positively and significantly related to dollar depth but has no impact on bid-ask spreads. Furthermore, using the adverse selection component of the bid-ask spread as a proxy for transparency, we find that larger boards reduce information asymmetries, but the ratio of insiders to total board members has no impact on informational asymmetries.
CITATION STYLE
Flaherty, S., Li, J., & Small, K. (2006). Evidence on board size and information asymmetry: A capital markets perspective. Corporate Ownership and Control, 4(2 C), 248–256. https://doi.org/10.22495/cocv4i2c2p1
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