Literature Review on the Relationship between Board Structure and Firm Performance

Abstract

Corporate governance plays a significant role in eliminating agency costs. Corporate boards have the main role of monitoring the management; they help in aligning the interests of principals and agents. Boards are responsible for care and diligence that brings financial control, so that profitability can be ensured in the corporate firms. This paper focuses on reviewing the literature on board structure extensively. This paper reviews many aspects of board structure, i.e. board size, board meeting frequency, board independence, board ownership and composition, board education, audit committee, and so on. Further, this paper furnishes the type of board structure that will contribute towards increasing firm performance, thereby helping in mitigating agency costs. This research study uses a descriptive research design. Random sampling is used while selecting different kinds of literature review of board structure. This study takes the 1991-2019 time period for reviewing of literature. The period is selected based on convenience sampling. The results depict that reasonable frequency of board meetings, the board size, independence of directors, well-educated board members, audit committee, board composition, and ownership make a positive impact on firm performance, thereby reducing agency costs.

Keywords: Agency Cost, Board Structure, Corporate Governance, Firm Performance

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