Does Board Size Matter: Panel Evidence from India

Yogender

Independent Researcher

Abstract - This paper investigates the relationship between corporate governance—specifically board size—and firm financial performance, measured by return on assets (ROA) and return on equity (ROE), within the Indian emerging market context. Using a hand-collected, primary-source panel dataset of five major BSE/NSE-listed Indian companies—State Bank of India (SBI), Larsen and Toubro (L&T), Reliance Industries, Adani Power, and Nestle India—over financial years 2020 to 2024 (25 firm-year observations), the study employs pooled OLS and entity fixed effects (FE) panel regression. The pooled OLS models reveal a significant negative relationship between board size and both ROA (β = −1.116, p < 0.001) and ROE (β = −5.016, p < 0.001).

However, once entity fixed effects are introduced, the board size coefficient becomes statistically insignificant for ROA (β = 0.030, p = 0.969) and ROE (β = 1.076, p = 0.430). The debt-to-equity ratio emerges as the only variable robustly associated with performance across all specifications: FE-ROA coefficient = −2.129 (p < 0.001); FE-ROE coefficient = −9.817 (p < 0.001). These findings have material implications for governance research methodology, regulatory design, and corporate financial management in emerging markets.

Keywords: corporate governance, board size, firm performance, return on assets, return on equity, panel data, entity fixed effects, agency theory, India, emerging markets, BSE, SEBI LODR, leverage