Board Size, Independent Board Tenure and Number of Board Meetings: Examining the Impact on Spanish Firms

Abstract

Spanish firms are well reputed for high level of corporate governance practices. Earlier studies have examined Spanish firm performance based on the causal relationship of board characteristics. However, the number of studies which examines the tenure of independent board members and number of board meetings are scarce. This study examines Spanish firm performances examining the board characteristics. A balanced panel data of a total of 805 listed companies are examined, which includes all economic sectors. Random effect model is applied to examine the causal relationship. The study suggests, board size has a favorable correlation with accounting-based performance (ROA, ROE), but it doesn’t go hand in hand with market-based performance (TQ). Tenure of independent directors have a positive relationship with both accounting and market-based performance. On the other hand, the number of board meetings has a negative acquaintance with both accounting and market-based performance of the firms. This research reveals a board’s inefficiencies that lead to poor firm performance, as well as what significant changes could be made to improve it. This study is based on all economic sectors, which implies that the results are equally representative of all. Policymakers, managers, and investors should consider the following implications: a significant positive relationship between board size and board tenure on firm financial performance suggests that institutional investors in emerging markets, particularly Spain, are paying attention to board activities.