This chapter examines the link between board diversity and firm financial performance for a sample of Dutch listed companies during the recent financial crisis. We examine seven dimensions of diversity: nationality diversity, gender diversity, diversity with respect to the level of education, diversity with respect to the field of education, expertise diversity, socioeconomic background diversity and age diversity. Our empirical results show a hyperbolic relation between the focal variables age diversity, expertise diversity and background diversity and firm financial performance. We also find that gender diversity, nationality diversity and diversity with respect to education have no impact on firm performance during crisis times. Our empirical results show that focusing on only one dimension of the full diversity vector or on linear effects only can lead to detrimental economic effects.
The recent financial crisis has led to a loss of trust in the quality of corporate governance worldwide. Among other reforms, the European Commission (EC) currently intends to regulate board diversity (at first gender diversity) by quota as companies did not voluntarily meet the EC's expectations on this issue so far. Considering the political debate it often becomes obvious that the debate on board diversity is primarily discussed from a moral perspective and on the basis of standard economic arguments or stereotypes ignoring the majority of empirical findings in this field. Focusing on this gap we identify very mixed results on the link between different attributes for board diversity and economic outcomes. Furthermore, these empirical findings mainly do not consider important aspects of work psychology and organizational behavior in the black box/closed circle of corporate boardrooms and often only focus on single attributes for board diversity and their direct impact on economic outcomes. Thus, without having a deeper understanding of the processes and dynamics within corporate boardrooms, we do not think this is the right time to regulate board diversity. Additionally, we think such a measure disproportionately intervenes in companies' authority to staff their boards and neglects companies' specific (economic) situation.
This book explores diversity in boardrooms to highlight the link between the heterogeneous dimensions of board diversity and their impact on the firms. The book provides a brief definition of corporate governance and focuses on the role and functions of the board of directors. The work contributes to the literature enriching the empirical findings about board diversity. After a deep review of the literature within several theoretical frameworks, such as agency, stakeholder, stewardship, resource dependence, and the institutional theory, the focus moves on the impact on financial performance. The board diversity effects are tested through an empirical analysis conducted on a sample of European listed companies, performing both a single and a joint diversity index analysis. Practitioners and academics will find this book particularly timely and useful as it combines both a review of the literature and robust empirical investigation. It will be an excellent reading for academics and practitioners interested in firm performance, corporate governance and stakeholder theory.
There are numerous studies on the effectiveness of boards that primarily focus on legal formalities, including gender diversity, board size, remuneration, board evaluation and the role of the chairman of the board. While attempting to design a one-size-fits-all framework, scholars approaching board independence from an agency cost perspective have been less concerned with analyzing board structures that contribute to strategic decision-making and corporate performance. We examine the factors and board strategies that are associated with value creation and innovation by analyzing the composition of high-performance and high-growth companies. The paper shows that venture capitalists, with their specific expertise and experience, continue to play an important role as independent board members in the post-IPO period. We specifically investigate the importance of diversity, showing that there are significant differences between the companies in terms of age, gender diversity and business expertise (which is dependent on the stage in the company life-cycle).
The book discusses the various aspects of diversity of corporate boards in terms of gender, age, nationality, tenure, education, experience and personalities. It enumerates the need for such diversity in each category and related concerns. Statistics from around the world support the authors’ claims. The nine chapters in this short book have not been previously published. Explains the dimensions of board diversity and ways to use them to increase effectiveness Supports its findings with statistics from around the world Relevant for researchers and professionals working in corporate governance and corporate finance
This first volume of the AIIB Yearbook of International Law (AYIL), edited by Peter Quayle and Xuan Gao, is based upon the inaugural 2017 AIIB Legal Conference, both titled, Good Governance and Modern International Financial Institutions (IFIs). Following a Preface by the General Counsel of the AIIB and General Editor of AYIL, Gerard Sanders, and an Introduction by the Editors, this volume of AYIL draws upon expertise from other IFIs, international law and governance practitioners, and eminent academics. It is divided into three parts to reflect a series of dimensions to the good governance of IFIs. Firstly, the role of the membership of IFIs as expressed through their executive governance organs. Second, the legal basis of governance of IFIs. And third, the interaction around governance between IFIs and external stakeholders. This volume concludes with the text of the 2017 AIIB Law Lecture, delivered by the United Nations Under-Secretary-General for Legal Affairs and Legal Counsel, Miguel de Serpa Soares on the subject of ‘The Necessity of Cooperation between International Organizations’ and a summary report on the proceedings of the 2017 AIIB Legal Conference. The first volume of AYIL was launched at the Annual Meeting of the Board of Governors of the AIIB in Mumbai, India, June 2018.
The current crisis has rocked the financial system worldwide and has cast doubt on the effectiveness of the existing regulatory regime. Thousands of firms have gone bankrupt and many financial institutions were bailed out by governments. The effects of the crisis have shaken emerging and developing markets alike and have not spared neither small nor large businesses. Many scholars and practitioners attribute the roots of the crisis to failures and weaknesses in the way corporate governance has been practiced since the mid-1990s. Lax board oversight of top management, short-termism and self-interested behavior have been fingered as the culprits behind recent financial turmoil. This book highlights the recent developments and new trends in corporate governance. The eighteen chapters, written by leading academics and experts, can assist corporate executives, governance bodies, investors, market regulators, and policymakers in having a global picture of major corporate governance issues. This book highlights the recent developments and new trends in corporate governance. The eighteen chapters, written by leading academics and experts, can assist corporate executives, governance bodies, investors, market regulators, and policymakers in having a global picture of major corporate governance issues.
Effective and qualitative corporate governance is the distinctive feature of newly emerging economy. Corporate governance has received significant attention due to global financial crisis and recent corporate failures involving multinational corporations all over the world. As the global economic system is changing, the corporate governance mechanisms are becoming essential determinants of companies current and future performance. Gender diversity and corporate performance have a strong association which entirely relies on effective board management. Therefore, the basic assumption is that appropriate gender diversity within the board will improved board effectiveness which in turn affect the firm performance. The major objective of this study is to examines the effects of board gender diversity on board and the firm performance. The study describes an extant research on theoretical and empirical perspectives with emphasis on the impact of women directors on corporate boards and firm performance. The study used secondary source as a method of data collections. The findings from the studies provides different outcomes; while some authors believe board gender diversity improve the level of firm performance, Others empirical studies discovered no any relationship between board gender diversity and firm financial performance. However, others were neutral by reporting neither positive nor negative relationship between gender diversity and firm performance. Furthermore, with respect to theoretical perspective, the study discover that both the agency theory and resource dependency theory only suggest the link between board gender diversity and firm performance, yet the real nature of the link remain unclear.
In the wake of the 2008 economic financial crisis, several corporate governance issues have became more relevant in the daily corporate life, among them Gender Diversity. Institutional investors, due to the critical environment began to scrupulously analyze the companies, in which they invest, monitoring the level of compliance with corporate governance best practices, something which has been neglected in the past. This lead to the view that companies in line with best practice were able to reduce risks and consequently become more stable enabling them to increase company value. Starting from 1977 several aspects of the gender diversity have been analyzed and several theories have been produced by experts in this field. In 1977, the author of Men and Women of the Corporation, Kanter, showed evidence of the benefits for a company to have a more balanced boardroom. In the last decade many researchers have dedicated their study on how more women directors could affect corporate value. The flow of theories can be classified in two categories. At the beginning, gender diversity was considered as simply the need to have more women on board, then and more recently as diversity of skills, expertise, culture and backgrounds. The interest for this argument has become wide spread, grabbing the attention of entities at different levels, including those in charge of regulating markets. Many European countries amended their Corporate Governance Codes and laws pushing for the increase of women on boards. With the intensification of different regulations, the European Commission issued a regulation, with the aim of encouraging higher participation of women at board level. Their aim was also to align all European countries rules, conscious of the relevance for companies operating in the same European environment, to work in a global market with common rules. The increased attention towards gender diversity also partly derived from the actions of proxy advisors and institutional investors. All European countries implemented their regulations at different levels, giving suggestions of targets to be reached through their corporate governance codes or through laws, as far as establishing punitive measures in case of failure to reach the established target on time. The present paper focuses on the Spanish market, an interesting jurisdiction because of the methods implemented and the progress witnessed at company level to reach the proposed targets. From 2007 to 2013 the percentage of women on boards passed from 5.78% to 14.56%. Significant the progress done in the last six years and, at the same time there is evidence that Spain moved earlier towards a balanced boardroom at legislative level, but without eliminates strong impact at corporate level except in very few cases. Country regulations did not have an effective impact on the level of women serving on boards at executive and non-executive levels due to the particular market structure. Directors can serve on the board for twelve years maintaining the status of independent director and frequently directors are re-appointed for many subsequent years. Furthermore there is not any rule for the number of boards in which a director can serve. Due to this many directors participate in more than one company board. This together with the twelve years of board tenure is obstacles to the increase of women participating to the board life. Another characteristic of the Spanish market that limits female presence on the boardrooms is the strong presence of families controlling the market. In this case many seats are covered by family representatives. This practice does not leave, much space, for external candidates to seat on the board and consequently limits the presence of women on boards. A stronger level of compliance with gender diversity is more evident from the perspective of mix of background and expertise. This level increased by 29.33% during the period considered in this study (from 2007 to 2013) and reaching 30.79% in 2013. A board that experiences a good balance in gender mix and international directors together with experts in transversal fields bring to the board expertise and knowledge to develop the company business in a more proficiency direction. This is considered to be the right recipe to enhance on corporate governance and avoid risks that could affect company value. Once more in Spain main shareholders or founding families are an obstacle to the circulation of new experience and ideas, able to ensure that the board is provided with the adequate people to take better decision in the company's interest. Moreover, all board members have a background, in terms of academic qualifications, in line with the business of the company while there is a lack of transversal expertise. The current Spanish situation shows that regulations at local or European level are not enough to reach a balanced boardroom for gender and professional profile of board diversity. Neither of the regulations coming from the European Commission and the Spain are considered punitive measures in case of no compliance. Records provided by Catalyst at the beginning of March 2014, highlight that Norway is the country with the highest level of compliance with 40.90% of board seats held by women . Norway can be considered an example of how mandatory quota rules can work for companies. Spain could reach a high level of compliance by adopting restrictive measures, in this case, neither those characteristic elements as the Directors' tenure or family owners, could limit or reduce the effectiveness of the measures proposed.
We examine the impact of board diversity on both the corporate value and equity risk of British companies since the financial crisis. We find that the inclusion of overseas directors on boards improves market value and reduces equity risk. When the number of female directors included on the board reaches a critical mass this also increases corporate value but has no effect on risk. These findings do not change when we allow for the presence of board members who are qualified accountants or who hold MBAs. Diversity in and of itself has a significant effect on corporate performance.
