*2.5. Board Size and Firm Performance*

Extant literature shows inconclusive results for the link between board size and firm performance. Lorsch and Maclver (1989) point out that a larger board size hurts firm performance because it impedes faster decision-making. Besides, a large board size incurs higher coordination costs because of the arduous process of trying to reach a consensus amongst all board members. Empirical works also trace a significant negative relationship between large board size and firm performance in many countries (Eisenberg et al. 1998, for Finland; Mak and Kusnadi 2005, for Malaysia and Singapore; Naushad and Malik 2015, for Bangladesh; Aljifri and Moustafa 2007, for the United Arab Emirates). In the context of Japan, Hu and Izumida (2008) and Sueyoshi et al. (2010) found no significant relationship between board size and firm performance. Nonetheless, some scholars argue that a large board size can enhance board independence and diversity, thereby increasing firm performance (Ciftci et al. 2019, for Turkish firms; Jackling and Johl 2009, for Indian firms).

We argue that, for family firms, most of the board members are selected from family members who are expected to be free riders. Thus, the coordination problem arising from a larger board size would not be a severe issue for family firms. Instead, a larger board of directors could bring in more opinions from members of diverse backgrounds and enhance firm performance by improving strategic decision-making. Thus, we take the following hypothesis.
