The influence of board size on firm performance: Evidence from national stock exchange CRISIL 500-listed banking companies

The current study examines the association for board size with firm performance in banking companies listed on the NSE CNX 500 Index in India, focusing on profitability, efficiency, and shareholder value. Using a quantitative approach, the research analyzes five years of panel data, employing statistical techniques such as correlation analysis, OLS regression, fixed and random effects models, and robustness checks. Control variables include firm debt, size, age, beta, and growth. The findings reveal a nuanced Relations between company performance and board size. Larger boards positively and significantly influence accounting-based metrics like return on assets (ROA) and return on equity (ROE), suggesting that diverse expertise enhances financial performance. However, board size negatively impacts market-based metrics such as market-to-book value ratio (MVBR) and Tobin's Q, indicating potential inefficiencies in larger boards. Earnings per share (EPS) is positively affected by board size in fixed and random effects models, but this effect diminishes when controlling for firm size, which consistently drives EPS. Net profit margin remains unaffected by board size, implying other factors influence profitability. Firm debt consistently harms ROA and ROE, highlighting the importance of financial management. Firm age shows mixed results, with older firms often experiencing lower market valuations. The research study underscores balancing off the benefits of diverse expertise in larger boards and the risks of inefficiency, emphasizing the need for optimized board sizes in the Indian banking sector. It also highlights the role of governance mechanisms like board subcommittees and independent directors in enhancing performance. Policymakers and practitioners should consider these findings to improve corporate governance practices. Future research could explore board diversity, leadership structures, and regulatory frameworks to further understand their impact on firm performance in emerging markets.