Now you see me: diversity, CEO education, and bank performance in the UK
-
DOIhttp://dx.doi.org/10.21511/imfi.15(1).2018.23
-
Article InfoVolume 15 2018, Issue #1, pp. 277-291
- Cited by
- 1880 Views
-
299 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
This paper investigates the impact of board diversity and CEO educational background on bank performance. Based on a sample of 54 UK publicly listed banks over the period 2005–2015, we examine the relationship of both static and dynamic modelling frameworks, which controls for individual specific effects and potential sources of endogeneity. The study reports a positive but insignificant relationship between CEO education and bank performance, and a positive significant association between gender diversity and bank performance. It further denotes a negative and significant impact of nationality diversity on bank performance. Our findings provide empirical support for the significance of the association between board diversity and firm performance. Our study also provides support for theories concerned with how corporate governance differs in financial institutions.
- Keywords
-
JEL Classification (Paper profile tab)G01, G20, G21, G30
-
References64
-
Tables6
-
Figures0
-
- Table 1. Summary statistics and cross-correlation
- Table 2. OLS model estimates
- Table 3. Robust OLS model estimates
- Table 4. Random effect model estimates
- Table 5. Fama – MacBeth model estimates
- Table 6. Quantile regression model estimates
-
- Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94(2), 291- 309.
- Adams, R., & Mehran, H. (2003). Is bank holding company governance different? Economic Policy Review, 9(1), 123-142.
- Adams, R. B., & Mehran, H. (2012). Bank board structure and performance: Evidence for large bank holding companies. Journal of Financial Intermediation, 21(2), 243-267.
- Bai, G., & Elyasiani, E. (2013). Bank stability and managerial compensation. Journal of Banking & Finance, 37(3), 799-813.
- Barker III, V. L., & Mueller, G. C. (2002). CEO characteristics and firm R&D spending. Management Science, 48(6), 782-801.
- Bart, C., & McQueen, G. (2013). Why women make better directors. International Journal of Business Governance and Ethics, 8(1), 93-99.
- Basel Committee, F. S. (2010), Basel committee on banking supervision, 2010, Assessing the Macroeconomic Impact of the Transition to Stronger Capital and Liquidity Requirements, BCBS.
- Beber, A., & Fabbri, D. (2012). Who times the foreign exchange market? Corporate speculation and CEO characteristics. Journal of Corporate Finance, 18(5), 1065- 1087.
- Becker, G. S. (1964). The Theory of Human Capital: A Theoretical and Empirical Analysis. New York: Colombia University.
- Berger, A. N., Kick, T., & Schaeck, K. (2014). Executive board composition and bank risk taking. Journal of Corporate Finance, 28, 48-65.
- Bhagat, S., Bolton, B. J., & Subramanian, A. (2010). CEO education, CEO turnover, and firm performance. SSRN eLibrary.
- Boulouta, I. (2013). Hidden connections: The link between board gender diversity and corporate social performance. Journal of Business Ethics, 113(2), 185-197.
- Brammer, S., Millington, A., & Pavelin, S. (2007). Gender and ethnic diversity among UK corporate boards. Corporate Governance: An International Review, 15(2), 393-403.
- Campbell, K., & Mínguez-Vera, A. (2008). Gender diversity in the boardroom and firm financial performance. Journal of Business Ethics, 83(3), 435-451.
- Carpenter, M. A., Sanders, W. G., & Gregersen, H. B. (2001). Bundling human capital with organizational context: The impact of international assignment experience on multinational firm performance and CEO pay. Academy of Management Journal, 44(3), 493-511.
- Carter, D. A., D’Souza, F., Simkins, B. J., & Simpson, W. G. (2010). The gender and ethnic diversity of US boards and board committees and firm financial performance. Corporate Governance: An International Review, 18(5), 396-414.
- Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity, and firm value. Financial Review, 38(1), 33-53.
- Choi, J. J., Park, S. W., & Yoo, S. S. (2007). The value of outside directors: Evidence from corporate governance reform in Korea. Journal of Financial and Quantitative Analysis, 42(4), 941-962.
- Clark, T. S., & Linzer, D. A. (2015). Should I use fixed or random effects? Political Science Research and Methods, 3(2), 399-408.
- Dezsö, C. L., & Ross, D. G. (2012). Does female representation in top management improve firm performance? A panel data investigation. Strategic Management Journal, 33(9), 1072-1089.
- Douma, S., George, R., & Kabir, R. (2006). Foreign and domestic ownership, business groups, and firm performance: Evidence from a large emerging market. Strategic Management Journal, 27(7), 637-657.
- Erkens, D. H., Hung, M., & Matos, P. (2012). Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide. Journal of Corporate Finance, 18(2), 389-411.
- Falato, A., Li, D., & Milbourn, T. (2015). Which skills matter in the market for CEOs? Evidence from pay for CEO credentials. Management Science, 61(12), 2845-2869.
- Fama, E. F., & MacBeth, J. D. (1973). Risk, return, and equilibrium: Empirical tests. Journal of Political Economy, 81(3), 607-636.
- Fiedler, F. E. (1964). A contingency model of leadership effectiveness. Advances in Experimental Social Psychology, 1, 149-190.
- Fogel, K. S., Lee, K. K., Lee, W. Y., & Palmberg, J. (2013). Foreign direct investors as change agents: The Swedish firm experience. Corporate Governance: An International Review, 21(6), 516- 534.
- García-Meca, E., García-Sánchez, I. M., & Martínez-Ferrero, J. (2015). Board diversity and its effects on bank performance: An international analysis. Journal of Banking & Finance, 53, 202-214.
- Gottesman, A. A., & Morey, M. R. (2015). CEO educational background and firm financial performance. SSRN eLibrary.
- Graham, J. R., Li, S., & Qiu, J. (2011). Managerial attributes and executive compensation. The Review of Financial Studies, 25(1), 144-186.
- Gregory‐Smith, I., Main, B. G., & O’Reilly, C. A. (2014). Appointments, pay and performance in UK boardrooms by gender. The Economic Journal, 124(574), 109-128.
- Hallock, K. F., Madalozzo, R., & Reck, C. G. (2010). CEO Pay‐ For‐Performance Heterogeneity Using Quantile Regression. Financial Review, 45(1), 1-19.
- Haslam, S. A., Ryan, M. K., Kulich, C., Trojanowski, G., & Atkins, C. (2010). Investing with prejudice: The relationship between women’s presence on company boards and objective and subjective measures of company performance. British Journal of Management, 21(2), 484-497.
- Hillman, A. J., Cannella Jr, A. A., & Harris, I. C. (2002). Women and racial minorities in the boardroom: How do directors differ? Journal of Management, 28(6), 747-763.
- Hutchinson, M., Mack, J., & Plastow, K. (2015). Who selects the ‘right’directors? An examination of the association between board selection, gender diversity and outcomes. Accounting and Finance, 55(4), 1071-1103.
- Jalbert, T., Rao, R. P., & Jalbert, M. (2002). Does school matter? An empirical analysis of CEO education, compensation, and firm performance. SSRN eLibrary.
- Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
- Kim, B., Burns, M. L., & Prescott, J. E. (2009). The strategic role of the board: The impact of board structure on top management team strategic action capability. Corporate Governance: An International Review, 17(6), 728-743.
- King, T., Srivastav, A., & Williams, J. (2016). What’s in an education? Implications of CEO education for bank performance. Journal of Corporate Finance, 37, 287-308.
- Lawal, B. (2012). Board dynamics and corporate performance: Review of literature, and empirical challenges. International Journal of Economics and Finance, 4(1), 22-35.
- Levine, R. (2004). The corporate governance of banks: A concise discussion of concepts and evidence. World Bank Publications, WP3404.
- Liang, Q., Xu, P., & Jiraporn, P. (2013). Board characteristics and Chinese bank performance. Journal of Banking and Finance, 37(8), 2953-2968.
- Liu, Y., Wei, Z., & Xie, F. (2014). Do women directors improve firm performance in China? Journal of Corporate Finance, 28, 169-184.
- Macey, J. R., & O’Hara, M. (2016). Bank corporate governance: A proposal for the post-crisis world. Economic Policy Review, 22(Aug), 85-105.
- Marinova, J., Plantenga, J., & Remery, C. (2016). Gender diversity and firm performance: Evidence from Dutch and Danish boardrooms. The International Journal of Human Resource Management, 27(15), 1777-1790.
- Masulis, R. W., Wang, C., & Xie, F. (2012). Globalizing the boardroom — The effects of foreign directors on corporate governance and firm performance. Journal of Accounting and Economics, 53(3), 527-554.
- Miller, D., Xu, X., & Mehrotra, V. (2015). When is human capital a valuable resource? The performance effects of Ivy League selection among celebrated CEOs. Strategic Management Journal, 36(6), 930-944.
- Mínguez Vera, A., & Campbell, K. (2007). The Influence of Gender on Spanish Boards of Directors: An Empirical Analysis. Instituto Valenciano de Investigaciones Económicas, SA (Ivie).
- Nielsen, S., & Huse, M. (2010). The contribution of women on boards of directors: Going beyond the surface. Corporate Governance: An International Review, 18(2), 136-148.
- Nielsen, S., & Huse, M. (2010). Women directors’ contribution to board decision‐making and strategic involvement: The role of equality perception. European Management Review, 7(1), 16- 29.
- Oxelheim, L., & Randøy, T. (2003). The impact of foreign board membership on firm value. Journal of Banking and Finance, 27(12), 2369-2392.
- Pathan, S., & Faff, R. (2013). Does board structure in banks really affect their performance? Journal of Banking and Finance, 37(5), 1573-1589.
- Ruigrok, W., Peck, S., & Tacheva, S. (2007). Nationality and gender diversity on Swiss corporate boards. Corporate Governance: An International Review, 15(4), 546-557.
- Salancik, G. R., & Pfeffer, J. (1978). A social information processing approach to job attitudes and task design. Administrative Science Quarterly, 23(2), 224-253.
- Shehata, N., Salhin, A., & El- Helaly, M. (2017). Board diversity and firm performance: evidence from the UK SMEs. Applied Economics, 49(48), 1-16.
- Sherif, M., & Anwar, S. (2016). Board structure, gender diversity and bank performance in emerging markets: Evidence from the MENA region’. The Institute of Small Business and Entrepreneurship (ISBE).
- Smith, N., Smith, V., & Verner, M. (2006). Do women in top management affect firm performance? A panel study of 2,500 Danish firms. International Journal of Productivity and Performance Management, 55(7), 569-593.
- Sula, O. (2011). Demand for international reserves in developing nations: A quantile regression approach. Journal of International Money and Finance, 30(5), 764-777.
- Taylor, J. B. (2009). The financial crisis and the policy responses: An empirical analysis of what went wrong. National Bureau of Economic Research, WP14631.
- Terjesen, S., Sealy, R., & Singh, V. (2009). Women directors on corporate boards: A review and research agenda. Corporate Governance: An International Review, 17(3), 320-337.
- Upadhyay, A., & Zeng, H. (2014). Gender and ethnic diversity on boards and corporate information environment. Journal of Business Research, 67(11), 2456-2463.
- Veltrop, D. B., Hermes, N., Postma, T. J., & Haan, J. (2015). A tale of two factions: Why and when factional demographic Faultline’s hurt board performance. Corporate Governance: An International Review, 23(2), 145-160.
- Wagana, D. M., & Nzulwa, J. D. (2016). Corporate governance, board gender diversity and corporate performance: A critical review of literature. European Scientific Journal, ESJ, 12(7), 221-233.
- Westphal, J. D., & Milton, L. P. (2000). How experience and network ties affect the influence of demographic minorities on corporate boards? Administrative Science Quarterly, 45(2), 366- 398.
- Zelechowski, D. D., & Bilimoria, D. (2004). Characteristics of women and men corporate inside directors in the US. Corporate Governance: An International Review, 12(3), 337-342.