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Corporate Governance pp 259–285Cite as

Board Diversity as a Shield During the Financial Crisis

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Abstract

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.

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Notes

  1. 1.

    The Netherlands have a two-tier board structure, consisting of a management board (Raad van Bestuur) in charge of the day-to-day operations of the firm and a supervisory board (Raad van Commissarissen). Dutch corporate law requires that all members of the supervisory board are non-executives.

  2. 2.

    This is not to say that the difference in diversity is the sole factor to explain the difference in the buy and hold return between both banks.

  3. 3.

    An alternative is the Teachman entropy measure (Teachman 1980). Instead of absolute proportions, this indicator uses a log-transformation. Essentially, the two indicators are very similar (Van der Laan et al. 2012).

  4. 4.

    Board size is also used in one-tier systems as a traditional corporate governance variable to measure the strength of monitoring (Yermack 1996). In our dataset the correlation between board size and relative board size is only −0.24, indicating that both variables are not substitutes for the strength of monitoring. In the empirical part board size has to be dropped from the regression model due to its high correlation with firm size (see infra).

  5. 5.

    In case of a missing data field for one or more board members, we cannot calculate the Blau indicator for this dimension. The company is therefore dropped from the dataset.

  6. 6.

    Regression results not presented here to save on space. Tables are available upon request.

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Author information

Authors and Affiliations

  1. Utrecht University School of Economics, Utrecht, Netherlands

    Peter-Jan Engelen, Annette van den Berg & Gerwin van der Laan

Authors
  1. Peter-Jan Engelen
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  2. Annette van den Berg
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  3. Gerwin van der Laan
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Corresponding author

Correspondence to Peter-Jan Engelen .

Editor information

Editors and Affiliations

  1. , Dept. of Accounting Finance and Law, Champagne School of Management, Avenue Pierre Brossolette 217, Troyes Cedex, 10002, France

    Sabri Boubaker

  2. , Cambridge Judge Business School, University of Cambridge, Trumpington Street, Cambridge, CB2 1AG, United Kingdom

    Bang Dang Nguyen

  3. , Dept. of Finance & Information Systems, ISC Paris School of Management, Boulevard du Fort de Vaux 22, Paris, 75017, France

    Duc Khuong Nguyen

Appendices

Appendix 1: Final Sample of Dutch Companies Listed on Euronext Amsterdam

Aalberts

KPN

Accell Group

Macintosh retail

Aegon

Mediq (OPG)

AFC ajax

Nedap

Ahold

Nedsense Enterprises

Akzo nobel

Neways Elec.Intl.

Amsterdam Commodities

Nieuwe Steen Investments

AMT Holding

Nutreco

Arcadis

Oce

ASM International

Octoplus

ASML Holding

Ordina

Ballast Nedam

Pharming Group

BAM Groep

Philips

Batenburg Techniek

Porceleyne Fles

BE Semiconductor

Post nl

Beter Bed Holding

Punch graphix

Bever Holding

Qurius

Binckbank

Randstad Holding

Boskalis Westminster

Reed Elsevier

Brill

Rood Testhouse

Brunel Intl.

Roto Smeets

Corio

SBM Offshore

Crown Van Gelder

Simac Techniek

Crucell

Sligro Food Group

CSM

Smit Intl.

Ctac

SNS Reaal

DOC-data

Spyker Cars

DPA Group

Stern Groep

Draka

Telegraaf Media Groep

DSM

Ten Cate

Eurocomm Prop

Tie Holding

Exact Holding

TKH Group

Fornix Biosciences

Tom Tom

Fugro

Unilever

Gamma Holding

Unit 4

Grontmij

USG People

Groothandelsgeb.

Value8

Heijmans

Van Landschot

Heineken

Vastned Offices

Hes – Beheer

Vastned Retail

Hitt Nm

Vivenda Media Groep

Holland Colours

Vopak

Hydratec Industries

Wavin

ICT Automatisering

Wegener

Imtech

Wereldhave

ING Groep

Wessanen

Innoconcepts

Witte Molen (Alanheri)

Kardan

Wolters Kluwer

KAS Bank

 

Appendix 2: Coding Scheme for Board Diversity

Variable

First name

Description

Initials of all first names

Code

Alfanumerical

Variable

Last name

Description

Last name of the person

Code

Alfanumerical

Variable

Gender

Description

Gender of the board member

Code

0 = unknown

 

1 = man

 

2 = woman

Variable

Nationality

Description

Nationality of the board member

Code

1 = Dutch

 

2 = German

 

3 = Belgian

 

4 = British

 

5 = French

 

6 = Italian

 

7 = US

 

8 = Canadian

 

9 = Swedish

 

10 = Irish

 

11 = Spanish

 

12 = Swiss

 

13 = Brazilian

 

14 = Indian

 

15 = Mexican

 

16 = Norvegian

 

17 = Finnish

 

18 = Australian

 

19 = Austrian

 

20 = Asian

 

21 = African

 

22 = Israeli

 

23 = Portugese

 

24 = Other

 

25 = Unknown

Variable

Year of birth

Description

Year of birth of the board member

Code

The calendar year of birth

Variable

Level of education

Description

Highest level of education of the board member

Code

0 = Unknown

 

1 = Lower than bachelor

 

2 = Bachelor degree

 

3 = Master degree

 

4 = Ph.D.

 

5 = Other

Variable

Field of expertise

Description

Specific knowledge and experience of the board member

Code

0 = Unknown

 

1 = Business

 

2 = Politics or diplomacy

 

3 = Macroeconomics or general economics

 

4 = Investments and treasury

 

5 = Banking, finance and financial services

 

6 = ICT

 

7 = Human resource management

 

8 = Law and tax management

 

9 = Accounting and financial administration

 

10 = Sustainability/social affairs/CSR

 

11 = Engineering

 

12 = Other

Variable

Background

Description

Primary sector of origin of the board member

Code

1 = Business

 

2 = Politics

 

3 = Governmental agency

 

4 = Not for profit

 

5 = Academic

 

6 = Other

 

7 = Unknown

Appendix 3: Correlation Table of the Variables in Our Model

Table 7
Full size table

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Engelen, PJ., van den Berg, A., van der Laan, G. (2012). Board Diversity as a Shield During the Financial Crisis. In: Boubaker, S., Nguyen, B., Nguyen, D. (eds) Corporate Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-31579-4_11

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