Optimum Board Size for Indonesian Public Companies


  • Komang Ayu Krisnadewi Fakultas Ekonomi dan Bisnis, Universitas Udayana, Kampus Unud Bukit Jimbaran Badung, Bali, Indonesia
  • Wayan Pradnyantha Wirasedana Fakultas Ekonomi dan Bisnis, Universitas Udayana, Kampus Unud Bukit Jimbaran Badung, Bali, Indonesia




Board size, firm’s value, PER ratio, PBV, Tobin’s Q


This research aims to investigate variables affecting board size in public companies listed on the Indonesian Stock Exchange (IDX) and optimum board size which maximizes firm’s value measured by Price to Earnings Ratio (PER), Price to Book Value (PBV), and Tobin’s Q. Using 4,379 observations from 2007 to 2015 of IDX data, this research finds that liquidity, solvability, activity, and profitability affect board size significantly in quadratic form. In addition, it is suggested that the optimum board size for small companies is four directors while the size for big companies is six to seven directors.


Ammari, A., M. Kadria, and A. Ellouse (2014), “Board Structure and Firm Performance: Evi-dence from French Firms Listed in SBF 120”, International Journal of Economics and Finan¬cial Issues, 4(3), page 580 – 590.

Atkinson, Anthony A., Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young (2012), Mana-gement Accounting: Information for Decision Making and Strategy Execution, Sixth Edition, Pearson Education, Inc., Upper Saddle River, New Jersey.

Berger, A.N., and E. Bonaccorsi di Patti (2006), “Capital Structure and Firm Perfor¬mance: A New Approach to Testing Agency Theory and an Application to the Banking Industry”, Journal of Banking & Finance, 30, page 1065 – 1102.

Bublykova, P (2014), “The Impact of Board Size on Firm Performance: Evidence from Hungary”. CEU eTD Collection, page 1 – 44.

Bunkanwanicha, P., J. Gupta, and R. Rokhim (2008), “Debt and Entrenchment: Evidence from Thailand and Indonesia”. European Journal of Operational Research, 185, 1578-1595.

Coles, J., N. Daniel, and L. Naveen (2007), ‘‘Boards: Does One Size Fit All?”. Journal of Financial Economics, 20, page 293-315.

Eisenberg, T., S. Sundgreen, and M. T. Wells (1998), “Larger Board Size and Decreasing Firm Value in Small Firms”. Journal of Financial Economics, 48, page 35 – 54.

Emrinaldi (2007), “Analisis Pengaruh Praktek Tata Kelola Perusahaan (Corporate Gover¬nance) terhadap Kesulitan Keuangan Perusa¬ha¬an (Financial Distress): Suatu Kajian Empiris”, Jurnal Bisnis dan Akuntansi, Vol. 9, No. 1, halaman 88-104.

Gertner, R., and S. Kaplan (1996), “The Value-Maximizing Board”. Unpublished Work¬¬ing Paper, University of Chicago and NBER.

Gitosudarmo, I. dan I Nyoman Sudita (2008), Perilaku Keorganisasian, Edisi Pertama, BPFE Yogyakarta.

Guest, P.M. (June 2009), “The Impact of Board Size on Firm Performance: Evidence from the UK”, The European Journal of Finance, 15 (4), page 385 – 404.

Hanafi, Mamduh M. dan Abdul Halim (2016), Analisis Laporan Keuangan, Edisi 5, UPP STIM YKPN: Yogyakarta.

Harris, M., and A. Raviv (2007), “A Theory of Board Control and Size”. Review of Financial Studies, 20, page 293–315.

Hery (2016), Analisis Laporan Keuangan, Integrated and Comprehensive Edition, Edisi 1, Grasindo: Jakarta.

Huang, G., and F.M. Song (2006), “The Deter-minants of Capital Structure: Evidence from China”. China Economic Review, 17, page 14–36.

Itto, Y and Shailer, S., 2014, “Asymptotical Relationship between Board Size and Value of Company”. Journal of Financial Mathematics. 13, 193-224.

Jensen, Michael (1986), “Agency Costs of Free Cash Flow, Corporate Finance, and Takeo¬vers”, American Economic Review, vol. 76, issue 2, pages 323-329.

Kajananthan, R and S. Achchuthan (2013), “Liquidity and Capital Structure: Special reference to Sri Lanka Telecom Plc”, Advances in Management and Applied Economics, 3, page 89-99.

Kelley, A. (2014), “Does Ability to Pay Debts Affect Decision to Change Board Composi¬tion?”. Journal of Mathematical Finance, 31, page 433–445.

Kyereboah-Coleman, A. and N. Biekpe (2007), “The Relationship between Board Size, Board Composition, CEO Duality, and Firm Perfor-mance: Experience from Ghana”, Corporate Ownership and Control Journal, 4 (2), no page.

Linck, James S., Jeffry M. Netter, and Tina Yang (2008), “The Determinants of Board Structure”, Journal of Financial Economics, 87, 2, page 308-328.

Lindenberg, Eric B. and Stephen A Ross (1981), “Tobin's q Ratio and Industrial Orga¬ni¬zation”, The Journal of Business, 54, 1, pages 1-32.

Luo, Yongli (2012), “Executive Compensation, Firm Performance and Liquidity Under Imper¬fect Corporate Governance”, The Uni¬ver¬sity of Texas-Pan American, ProQuest Dissertations Publishing

McMurty, M., and T.S. Ralph (2012), “Board Size in Liquid and Illiquid Market”, European Journal of Accounting and Finance, 29, page 322–341.

Moody, M.N and Zang, B. (2011), “Board Size and Firm’s Value”. Journal of International Finance and Economics, 33, 212-222.

Otoritas Jasa Keuangan (2014), “Peraturan Otoritas Jasa Keuangan Nomor 33/POJK.04/ 2014 tentang Direksi dan Dewan Komisaris Emiten atau Perusahaan Publik”.

Qian, E., and T. Han (2013), “Profitability and Board Size: Chinese Experience”, Chinese Accounting Review. 22, page 343–374.

Robbins, Stephen P., and Timothy A. Judge (2009), Organizational Behavior, 13th Edition. Pearson Education, New Jersey.

Samuel, Eyenubo A. (March 2013), “The Impact of Bigger Board Size on Financial Performance of Firms: The Nigerian Expe¬rience”, Journal of Research in International Business and Management, 3 (3), page 85–90.

Siagiaan, Sondang P. (2007), Teori Pengem¬bangan Organisasi, Edisi 1, Bumi Aksara, Jakarta.

Sisdyani, Eka A., Komang Ayu Krisnadewi, dan Putu Agus Ardiana (2016), “Pengaruh Nonlinear Pengelolaan Korporasi pada Nilai Perusahaan”, Kertas Kerja Penelitian LPPM Universitas Udayana.

Subramanyam, K. R. and John J. Wild (2010), Analisis Laporan Keuangan (Edisi Terjemah¬an oleh Dewi Yanti), Edisi 10, Buku 2, Salemba Empat: Jakarta.

Tran, Q. and Y. Tian (2013), “Organizational Structure: Influencing Factors and Impact on a Firm”, American Journal of Industrial and Business Management, 3, page 229–236.

Trenor, A.L., and C.A. Adams (2014), “Activity Ratios and Their Impact to Board Size”, Journal of Contemporary Finance. 43, page 322–341.

Triwahyuningtias, Meilinda dan Harjum Muha-ram (2012), “Analisis Pengaruh Struk¬tur Kepemilikan, Ukuran Dewan, Komisaris Independen, Likuiditas dan Leverage ter¬hadap Terjadinya Kondisi Finacial Distress (Studi Pada Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia Tahun 2008-2010)”, Diponegoro Journal of Manage¬ment, 1(1), page 1-14.

Wild, John J, K. R. Subramanyam, Robert F. Halsey (2007). Financial Statement Analysis. Published by McGraw-Hill/Irwin. 9th Edition.

Yermarck, D. (1996), “Higher Market Valua¬tion of Companies with a Small Board of Directors”, Journal of Financial Economics, 40, page 185–211.