The Effect of Board Composition on Firm Performance: A Review

HRMARS - The relationship between board composition and corporate performance is a long-standing and central topic in corporate governance research. The existing literature mainly adopts an agency theory perspective, emphasizing the monitoring role of external directors; however, previous studies have reached conflicting conclusions. In contrast, research adopting a resource dependence theory perspective is relatively limited. According to resource dependence theory, boards not only fulfill oversight duties but also influence corporate performance by providing critical resources, expertise and external connections. This paper provides a critical review of the prior literature on board composition, focusing on summarizing the functional differences among different director types in terms of resource provision and external linkages. By integrating findings from agency theory and resource dependence theory, the paper reveals the various mechanisms through which board composition influences corporate performance. It also offers new theoretical perspectives and research directions for future corporate governance studies.