A contingency model of board characteristics and foreign institutional investor ownership: The moderating role of firm size and market valuation

We investigate the governance sensitivity of foreign institutional investors' (FII) ownership in a large emerging market setting of India, characterized by highly concentrated insider ownership. More specifically, we focus on the moderating role of firm size and price to book value (PB) in determining the relationship between FII ownership and board characteristics, such as board size, outside director ratio, CEO duality, and board meeting attendance. Our methodology emphasizes the importance of contextual analysis in studies relating to institutional investors' preferences. We find that FIIs prefer bigger boards and greater board independence in larger and growth firms (higher PB). Further, FIIs prefer firms that have separate CEO and Chairman of the board positions in growth firms.