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board diversity and financial firm performance in Dutch listed firms

Overveld, Mees N.J. (2012) board diversity and financial firm performance in Dutch listed firms.

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Abstract:Board diversity is among the most significant corporate governance issues faced today (Milliken and Martins, 1996). Many firms in the USA are beginning to exemplify that diversity in board of directors leads to higher firm performance (Carter et al., 2003); therefore scholars have begun to investigate the relation between diversity in board of directors and firm performance. Some countries around the world, and in specific Europe, have even introduced mandatory quotas for female directors (Vermeeren, 2012). This study examines the relationship between board diversity, in terms of gender composition and age dispersion, and the financial firm performance measures return on assets and Tobin’s Q. The relationship is tested with data from 2010 of 95 Dutch firms, listed on Euronext Amsterdam. For the contribution to scarce European evidence, this study is bilateral. In the data analyses, first data is used of all the directors, meaning supervisory board plus the management board (abbreviated as BOD). Due to non-executive activities of the supervisory board, the second part of the data analysis uses data of the board of management only (abbreviated as BOM). From the 95 Dutch listed firms, there are 713 directors in the sample. The average number of board members in the BOD is 7.4 with a minimum of 3 board members and a maximum boardroom of 15 directors. The average percentage of female representation in the BOD is remarkably low with only 6.3%. In addition, only 38% of the sample firms have at least one woman in the BOD. These results are in line with the study of Lückerath-Rovers (2010). For the BOM in the Dutch listed firms, the percentage of female representation is even lower, 5%, with only 16% of the sample firms having at least one woman in the BOM. The average age of all the directors, BOD, is 57 (birth year 1953). The range in years is 18 years, with the youngest director in the sample of 46 years old and the oldest director of 64 years old. Looking to the average age of executive directors, BOM, this number is somewhat lower, 52 years old. The results from the Pearson Correlation Coefficient Matrix and the ordinar least squares regression analyses provide evidence that, in line with prior European studies (e.g. Marinova et al., 2010; Randoy et al., 2006), there is no significant relationship between the variables of board diversity and the financial firm performance measures. Sequentially, hypothesis 1 and 2 did not find any support in the results; therefore, both hypotheses are rejected. Despite the insignificance between the independent and dependent variables for this sample, in order to complement the scarce European and Dutch evidence, it was worth it to investigate this relationship.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/61806
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