Effect of Board Size on Earning Response Coefficient (Evidence from Pakistan)
1 Ph.D Scholar, Department of Management Sciences, Islamia College Peshawar
2,3,4 Assistant Professor, Department of Management Sciences, Islamia College Peshawar
This study investigates whether large board size plays a significant role to enhance the Earning Response Coefficient (ERC) while controlling the established determinants of Earning Response Coefficient (Beta, Growth, Size and Earning Persistence). The study selected 250 non-financial firms of different sectors on the basis of purposive sampling technique which are enlisted in Pakistan stock exchange (PSX) for the time periods of eight years ranging from 2008 to 2015. Using reverse regression, it has been observed through statistical analysis that Beta is negatively related to ERC while others determinants (Growth, Size and Earning Persistence) are positively related to earning response coefficient (ERC). Moreover, the analysis result also suggested that corporate governance facet (large board size) plays a significant role to enhance the earning response coefficient, because large board size has different skills, capabilities, knowledge and expertise which have great potential to increase the earning response coefficient (ERC). The important contribution for literature is that before making investment decision in stock market, investors should evaluate the corporate governance variables (Board size) of the firms which can boost earning response coefficient (ERC). Secondly, previous studies (Collins & Kothari, 2004) and others researchers mostly worked on developed countries in the same area, but this research study is limited to emerging economy of Pakistan, that’s why it has great contribution for literature .
Keywords: Board size, Board size and ERC, ERC Determinants.