NON-LINEAR AND DUMMY EFFECTS OF BOARD SIZE ON SHARE PRICE AMONG LISTED FIRMS IN GHANA USING SEEMINGLY UNRELATED REGRESSION

Purpose-This study seeks to determine the specific number on a board that gives the highest share value for listed companies in Ghana. 

Design/methodology/approach- Non-linear and dummies for board size of 7, 8, 9, and 10 were used in seemingly unrelated regression to determine the optimum board size. Listed firms in Ghana were used in a panel data with 144 firm-year observations.

Findings- The study reveals that larger board size is positively and significantly associated with firm valuation. Further examinations to check for the presence of non-linear associations reveal statistically significant inverted U-shaped association for board size. The study shows that an “efficient limit” to board size should be nine (9) members. Financial firms are associated with higher level of investor confidence and higher market valuation than non-financial firms and larger board size offers less benefit to investors of financial firms relative to those in the non-financial sector. Practical implications – Investors and firms should appreciate that different board size affect share price differently and the optimum number that should constitute a board in Ghana is nine (9).

Originality/value- firm value has been determined using five different measures to determine optimal board size (9).