A new perspective on board composition and firm performance in an emerging market

This paper seeks to examine the relationship between board composition and firm performance using a board‐level aggregation variable.

This study uses linear regression to analyze the relationship between board role typology and firm performance using a panel data set of 277 non‐financial listed Malaysian firms over the period 2002‐2007.

The empirical results show that firm‐boards with a high representation of outside and foreign directors are associated with better performance compared to those firm‐boards that have a majority of insider executive and affiliated non‐executive directors.

The findings seem to imply that in widely owned firms a higher proportion of outsiders on the board reduces under‐investment and agency problems, which has significant economic implications.

This is the first study to use a board‐level aggregation variable to demonstrate the impact of boards' resourcefulness on firm performance.