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