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Manuscript Type Empirical Research Question/Issue Due to a greater difficulty to achieve compromise, large decision-making groups tend to adopt less extreme decisions. This implies that larger boards are associated with lower corporate risk taking. We test whether a similar effect applies to the case of Japanese firms. The result is expected to be weaker since Japanese boards form relatively homogeneous groups. We further argue that growth opportunities moderate the relation between board size and risk taking. Research Findings/Results Our results indicate that firms with larger boards exhibit lower performance volatility as well as lower bankruptcy risk. However, the effect is not as significant as in the US. The low cross-sectional variation in risk taking among Japanese firms is found to play a role. In addition, we show that the effect of board size is less significant when firms have plenty of investment opportunities, but much stronger when firms have fewer growth options. Theoretical Implications Considering that risk taking contributes to firm performance, our results offer a rationale as to why larger boards might be associated with lower performance. However, they also suggest that this effect should be less detrimental to firms with significant investment opportunities. Practical Implications Firms should adapt their decision processes to their business environment. In particular, they may need to adjust the size of their boards to the characteristics of their investment opportunity sets. Firms with fewer growth options would gain most by operating with smaller boards. By restricting their ability to take risks, firms could undermine their growth potential and performance. [ABSTRACT FROM AUTHOR]

Manuscript Type: Empirical Research Question/Issue: We examine the incentive and entrenchment effects of controlling shareholders on the association between the investment opportunity set and earnings management in Taiwan. Research Findings/Results: We find that firms with more investment opportunities are more likely to engage in earnings management. We also find incentive effects of controlling shareholders on firm's financial reporting behavior in that cash flow rights are negatively associated with absolute abnormal accruals under a growth opportunity setting. Our results further indicate that high-growth firms with a high deviation between cash flow rights and control rights are more likely to engage in earnings management. Further analyses indicate that as the controlling shareholders have effective control of a firm, the effect of controlling shareholder deviation between control and cash flow rights on earnings management becomes stronger. Theoretical/Academic Implications: This study extends existing agency and contracting literature on the incentive and entrenchment effects of controlling shareholders in East Asia on firm value to the quality of financial reporting, which has been a consistent concern of regulators, practitioners, and academia. Our findings provide empirical evidence on the impact of controlling shareholders on the quality of financial reporting in a growth opportunity setting. Practitioner/Policy Implications: Our findings suggest that the institutional environment, such as the growth opportunity setting in Taiwan, matters to the firm's financial reporting behavior in an emerging market, where a corporate governance code has been enacted to protect minority shareholders. This study offers insights to policy makers interested in enhancing the mechanism of corporate governance in emerging markets, which have more potential conflict of interests between controlling shareholders and minority shareholders. [ABSTRACT FROM AUTHOR]