Do outsider-dominated boards and large board sizes curtail firm enterprise activities?

Recent literature recognizes the need for corporate governance to encompass mechanisms for motivating managerial behaviour towards enhancing enterprise activities or increasing wealth of the firm. Agency theory and current regulatory activity advocate increasingly greater roles for outsiders on the board of directors of publicly-traded firms. The literature also put forward that board size affect firm activities independent of other board attributes. Lipton and Lorsch (1992) also propose limiting board sizes to enhance communication and coordination on the board of directors as well as increase the ability of the board of directors to control top management of firms. This suggests that there are biases as board size grows. This paper, therefore, studies the implications of outsider-dominated board of directors and board size on firm enterprise activities. The paper finds that outsider dominated board of directors have a negative impact on firm enterprise activities. Board size was found to have a positive effect on firm enterprise activities.<br />