Critically Discuss Whether and How Board Size Affects the Companys Decision-making

Abstract

The board size affect the decision-making process and the effectiveness of the board (Dwivedi and Jain, 2005). The influence of board size on corporate risk-taking, investment decisions, dividend policy, and innovation remains inconclusive due to varying perspectives based on agency theory, resource dependence theory, and institutional backgrounds. As for firms’ decision-making, the company's goal is to maximize profits, so the company needs to make a series of reasonable decisions to meet the needs and expectations of shareholders in a specific environment . While smaller boards may facilitate risk-taking and investment strategy, larger boards offer diverse skills and experience for better decision-making, dividend expansion, and innovation. However, findings are limited by external factors, sample sizes, data biases, industry specificity, and cross-sectional nature of studies. Future research should consider continuous variables, larger samples, and longitudinal analysis to generalize findings across countries and industries.Therefore, in order to achieve this goal, the company needs to consider how to make decisions in the following directions, such as enterprise risk-taking, investment policy, financing policy, innovation policy and so on. This study mainly analyzes how the size of the board of directors affects the company's decision-making.