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Board Composition and Organizational Performance: Two Studies of Insider/outsider Effects[Note 1. Address for reprints: John A. Wagner III, Department of ...]
Author(s) -
Wagner III John A.,
Stimpert J. L.,
Fubara Edward I.
Publication year - 1998
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/1467-6486.00114
Subject(s) - insider , composition (language) , business , regression analysis , curvilinear coordinates , econometrics , accounting , economics , mathematics , statistics , political science , linguistics , law , philosophy , geometry
This paper presents two studies that examine the commonly held belief that corporate boards are more likely to have positive effects on organizational performance when composed of outside directors. The first study – a meta‐analysis of 63 correlations – indicates that, on average, the greater presence of outsiders is associated with higher performance, but so too is the greater presence of insiders. Instead of providing evidence of a positive outsider effect, these results suggest the existence of a curvilinear homogeneity effect in which performance is enhanced by the greater relative presence of either inside or outside directors. The second study – a hierarchical polynomial regression analysis of data from 259 large US companies – confirms the existence of a curvilinear relationship between insider/outsider composition and performance measured as return on assets.