Non-linear Effects of Board Structure on Firm Performance Evidence from Romania

The paper centers on the non-linear effects of selected Corporate Governance variables, board size and selected board diversity characteristics, on the financial performance of Romanian companies. We highlight the importance of the context of an emerging market like Romania, characterized by high ownership concentration, relatively small size of the companies and specific corporate governance standards. The study uses a balanced panel dataset consisting of Romanian listed companies and covering the period 2017–2025. We examine whether board size and selected diversity characteristics influence financial performance, as measured by the Price-to-Book ratio. The analysis uses as hypothesis and tests for non-linear relationships in order to capture and reflect market specific constraints. The results indicate a non-linear influence of the board size on firms’ financial performance, while diversity variables reflect an inverted U-shaped relationship. These findings support that context and market characteristics are important and that improving analyzed corporate governance variables have linear effects only within specific ranges. It also highlights the importance of understanding the corporate context specific to Romania and possibly to other emerging markets.