Board Structure and Firm Performance: The Moderating Role of National Governance Quality

This study empirically investigates the relationship between board composition, focusing on board size and board independence, and firm performance. It further examines how national governance quality moderates this relationship. Using a panel dataset of 1604 firms from 41 developed and emerging economies, the study employs pooled ordinary least squares (OLS) as the baseline regression method, alongside two-stage instrumental variable regression and system generalised method of moments (GMM) to address potential endogeneity concerns. Firm performance is measured using return on equity (ROE) and Tobin’s Q. Board size is captured by the number of directors on the board, while board independence is measured by the proportion of non-executive directors. The findings indicate that while board size and independence are positively associated with firm performance, the strength of these relationships weakens in countries with high governance quality. Our findings remain robust after controlling for dynamic endogeneity and unobserved time-invariant heterogeneity inherent in the corporate governance–performance nexus.