Macroeconomic Uncertainty, State Ownership, and Board Size in China

This paper examines the impacts of macroeconomic uncertainty, state ownership and board composition on firm performance. First, we find state ownership is negatively related to firm performance measured by return on assets and Tobin's Q. However, Tobin's Q increases with state ownership when firms face a higher level of macroeconomic uncertainty. The strong positive incremental effect of state ownership on Tobin's Q is robust when controlling for possible endogeneity. Second, we add evidence to the negative relationship between board size and firm performance. But we further show that Tobin's Q increases with board size when the level of macroeconomic uncertainty is high. Our results indicate that connections/resources provided by directors and through the ownership arrangement are valuable to cope with macroeconomic uncertainty