Prior literature documents that larger boards pursue conservative investment policies and that their decision outcomes are moderate, which promote an environment of risk aversion. I argue that this risk aversion hurts equity holders when firms hold a larger amount of long‐term debt. Addressing potential endogeneity problems associated with board size, I find an equity discount associated with larger boards in firms that have greater amounts of long‐term debt. On the other hand, larger boards are associated with an equity premium when firms have a greater short‐term debt‐to‐assets ratio. The equity discount associated with larger boards disappears in firms with no long‐term debt. Further analysis also indicates that firms with larger boards enjoy a better credit rating and a lower realized cost of debt. Overall, analysis in this study suggests that the association between board size and equity value is a function of a firm's debt structure.