Board Composition and Bank Performance: The Effects of Board Composition on the Financial Performance of Danish Banks in 2014-2018

Nora Ali

Studenteropgave: Kandidatafhandlinger

Abstract

Board composition - especially when it relates to diversity, has become a major topic of discussion within the corporate governance field with a number of studies seeking to explore the effect on firm performance. Banks are often excluded from these studies, since they operate under different structures and are under a highly regulated environment. This thesis is inspired by the “Recommendations on Corporate Governance” report from the Danish Business Authority’s Committee on Corporate Governance (2017) and seeks to examine the relationship between three corporate governance factors, the size of the board, the diversity of the board, the average number of directorships, and financial performance on a sample of 61 Danish banks over the time period 2014-2018.
The empirical analysis controls primarily for accounting-based financial measures. The results conclude that board size has a negative, but non-significant, effect on financial performance of Danish banks. This paper, furthermore, does not find a significant link between financial performance, as measured by return on average assets, and female/foreign board representation. We do find evidence for the “critical mass” theory; when the proportion of female and foreign board representation exceeds respectively 31% and 67%, the effect of this type of diversity on financial performance is significantly positive after controlling for a number of governance and financial variables.
Finally, we find that multiple directorships have a significantly negative effect on return on average assets.

UddannelserCand.merc.aef Applied Economics and Finance, (Kandidatuddannelse) Afsluttende afhandling
SprogEngelsk
Udgivelsesdato2020
Antal sider73
VejledereTom Kirchmaier & Anne Sophie Lassen