Composition of Board of Directors

                                                               Abstract:

This article review has been done to illustrate the impact of Board composition, board size and its impact on company performance. The company financial performs can be measure in terms of return on asset (ROA),return on equity (ROE),return on sales (ROS) and Tobins Q. Some articles are chosen in which the researches are carried out on firms in Pakistan, India and USA. In Most of the articles the hypothesis shows corporate governance dimensions have significant relation with performance measures and few of them showed that it does not have any effect on firm’s performance.

Keywords: Corporate Governance, Board Composition, Board Size, ROA, ROE, ROS, Tobin’s Q

Introduction:

Corporate governance is observed as crucial in the current business setup as it empowers organizations to achieve their corporate objectives, fulfil legal requirement, protect shareholder’s rights, and show to public how they are operating the business. Corporate governance is one of hottest topic, largely studied and postulated by many researchers that increased firm performance. Many researcher argued that if cooperate governance increases the performance of firm also increases. As corporation’s sizes grow the complexity and doing business worldwide, it is compulsory for the boards attain the highest level of corporate governance standards in order to gain high performance. The corporate governance has different dimension such as board size and board composition. Evidence has shown that inefficient function of the board resulted in collapse, of large organizations around the world. The board effectiveness is revealed as a requirement, for a sound corporate governance, framework based in the view that effectiveness is likely to influence positively the company performance.

 The top board of director standout amongst the most essential administration instruments in corporate governance adjusting the interests of manager and shareholders. The effective board of directors is at the heart of the administration structure of a well-working and very much represented organization, going about as a definitive inward screen. In a perfect world, the board manages long haul corporate system, sets up the key operators to execute it, and screens execution against the methodology set out. Earlier studies perceive that board size and board composition makes a board productive and successful towards playing out its obligations and duties. Those studies have uncovered the way that different regions practice differently corporate governance practices (Farrar, 2001; and Bonn, 2004). This study means to discover relationship between board Composition, board size and its impacts on company's performance. This study is examined by various reseachers (Bhagat and Black, 1999; Shah, Butt, and Saeed, 2011; Yasser, Entebang, and Mansor, 2011) however there results negate with each other. A group of the scientists (Hermalin, 2005; Rashid, Zoysa, Lodh and Rudkin, 2010; Shah et al., 2011; Yasser et al., 2011) uncovered that Independent board may enhance the firm execution while other (Bhagat and Black, 1999) found no such relationship. Thusly the present study endeavors to address the disarray pervasive in prior studies and reconsider the relationship between board structure and firm performance.

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