Board of director efficacy and firm performance variability

While academic researchers continue to debate the effect of board independence in increasing performance, its efficacy could also be reflected in whether firm performance is made more stable. Board governance activities are a constellation of actions aimed at managing agency costs and ensuring the viability of a company over time. The efficacy of such actions would, therefore, be reflected in a distal outcome, specifically, in lower firm performance variability. Boards that can control agency costs and limit both underinvestment and overinvestment would reduce a firm's deviation from its mean performance trajectory. Using a longitudinal sample of publicly traded companies in the United States, we find that board stability, board resource provision, and CEO influence are negatively associated with performance variability. Board independence is not associated with performance variability. With increasing board independence, greater board stability and greater CEO influence are negatively associated with performance variability, however, greater board resource provision is not associated with performance variability.