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Using Geographic Density of Firms to Identify the Effect of Board Size on Firm Value and Corporate Policies
Author(s) -
Chintrakarn Pandej,
Tong Shenghui,
Jiraporn Pornsit,
Kim Young Sang
Publication year - 2020
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12285
Subject(s) - leverage (statistics) , profitability index , business , exploit , dividend , enterprise value , accounting , location , value (mathematics) , finance , statistics , geography , mathematics , computer security , computer science , geodesy
Prior research shows that firms tend to recruit directors from the geographically proximate area. Due to a limited supply of qualified individuals in a given area, firms located in close proximity have to share a limited pool of talented individuals. As a result, the more firms there are in the same area, the fewer directors each firm in the area is able to obtain on average. We exploit the variation in the numbers of firms across zip codes and estimate the effects of board size on various corporate outcomes: accounting profitability, leverage, dividend payouts, and merger and acquisitions.