AN ANALYSIS OF BOARD OF DIRECTOR SIZE AND COMPOSITION IN BANKRUPT ORGANIZATIONS

Research on corporate boards of directors has suggested that organizat ions rely on boards to control external interdependencies. As such, or ganizations often build large boards staffed with a large number of ou tsiders who have access to critical resources. Little work has been do ne, however, to investigate the impact of boards in problematic enviro nments or during crisis situations. Using a matched pairs design, this study examined a sample of 12 7 bankrupt firms along with an equal nu mber of nonbankrupt firms. In the period leading to bankruptcy declara tion, declining firms experienced loss of outside directors and declin e in overall board size. When compared to their nonbankrupt counterpar ts, bankrupt companies were also found to have significantly different board structures and to make more changes in their boards in the peri od after Chapter 11 filing. Possible reasons for these differences are discussed along with the implications of these findings for researche rs and corporate directors.