Evidence on board size and information asymmetry: A capital markets perspective Article

cited authors

  • Flaherty, S; Li, J; Small, K

fiu authors


  • We examine the relation of board size with market liquidity and adverse selection costs using a sample of Fortune 200 companies. After controlling for firm specifics, equity characteristics, and ratio of insiders, we find a direct relation between board size and equity market liquidity. Our findings indicate that board size is positively and significantly related to dollar depth but has no impact on bid-ask spreads. Furthermore, using the adverse selection component of the bid-ask spread as a proxy for transparency, we find that larger boards reduce information asymmetries, but the ratio of insiders to total board members has no impact on informational asymmetries.

publication date

  • December 1, 2006

start page

  • 248

end page

  • 256


  • 4


  • 2 C