Optimizing Board Structure for Enhanced Firm Value: A Conceptual Framework

Abstract

This conceptual paper aims to develop a framework for optimizing board structure to enhance firm value. By synthesizing theoretical perspectives, empirical research, and best practices, the study proposes a comprehensive framework that integrates key elements of board structure and their impact on firm value creation. The study adopts a systematic literature-based methodology. The framework encompasses board composition, independence, diversity, size, committee, and leadership roles, with a focus on aligning these dimensions with the strategic objectives and unique characteristics of the firm. Findings from the literature, re-iterates that board structure is an important factor in determining the firm value. Strategic decision making, risk management and oversight, succession planning and leadership development, external relations and investor confidence, as well as regulatory compliance were proposed as mechanisms to facilitate the attainment of optimal board structure for enhancement of firm value. The paper provides a conceptual road-map for corporate boards, executives, and policymakers to strategically design and optimize board structures that maximize firm value.