Is ‘Excess’ Board Independence Good for Firm Performance? An Empirical Investigation of Non-financial Listed Firms in Saudi Arabia

Basmah Altuwaijri, Lakshmi Kalyanaraman


We investigate the relationship between board independence and firm performance. We hypothesize that while the presence of independent directors helps improve firm performance, excess independent directors on the board will not contribute to firm performance. We test our hypotheses on data drawn from non-financial firms listed on Saudi Arabian stock exchange applying panel data regression with fixed effects model. We find that board independence, ratio of independent directors to board size, has a positive link with firm performance while excess board independence, defined as a dummy variable measuring the number of independent directors in excess of regulatory minimum, is found to have no statistically significant relationship with firm performance. Our findings have important implications for the management of listed firms as more than 50% of the firm-year observations from 6 out 11 sectors studied have excess board independence. We conclude that in order to enjoy the benefits of the presence of independent directors on the board, the firm should keep it at the regulatory minimum.

Full Text:



This journal is licensed under a Creative Commons Attribution 4.0 License.

International Journal of Financial Research
ISSN 1923-4023(Print)ISSN 1923-4031(Online)


Copyright © Sciedu Press

To make sure that you can receive messages from us, please add the '' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.