Board Size, Board Diversity, and Firm Performance: A Comparison of Japan and the United States

This paper analyzes the effect of board size and board diversity on firm performance in Japanese and US companies. Board size did not affect firm performance significantly in both countries. However, board diversity was found to affect firms in two countries differently. Specifically, age diversity was positively related with firm performance in Japan, whereas it did not affect firm performance in the US. In addition, educational background diversity is not significantly related to firm performance in Japan. while it has a significantly positive effect on firm performance in the US. These findings suggest that diversity of the board matters more than the size of the board for firm performance. It is also worth noting that the effect of director diversity, e.g., age diversity or educational background diversity, on firm performance depends on social and cultural circumstances of the firms.