Abstract
Based on agency theory, this paper contributes to the literature by assessing the effects of Supervisory Board size, gender diversity, and multiple directorship on performance within the banking industry of the small island developing state: Curacao. The research made use of the data drawn from annual reports of locally generated banks and its subsidiaries. Results from linear regressions indicate a positive relationship between multiple directorship and bank performance, and a negative association between bank outcomes and both gender diversity and board size. According to these results, it is concluded that the legislation on corporate governance for credit institutions in Curacao should incorporate a maximum number of members on the board, as well as promote interlocking directorates and quotas by gender.
Highlights
Corporate Governance can be defined as arrangements intended to align company objectives and ensure that the rights of firm stakeholders are not violated (John & Senbet, 1998)
In order to analyze the interconnection between Board Size, Gender Diversity, and Multiple Directorship on Bank Performance, this study made use of data drawn from annual reports of supervised locally generated banks
This contradicts the first hypothesis of the study: Gender Diversity in the supervisory board has a positive relation with banks performance in Curacao
Summary
Corporate Governance can be defined as arrangements intended to align company objectives and ensure that the rights of firm stakeholders are not violated (John & Senbet, 1998). The board composition – Board Size, Multiple Directorships, and Gender Diversity, among others – are factors that impact the Supervisory Board as a whole and may influence the effectiveness and the decision-making process. Small boards have been positively related with company results (Yermack, 1996), as it is easier to reach consensus, make decisions, and monitor the firm; Multiple Directorships can help the organizational performance because board members linking a firm to its external environment can foster access to critical information and valuable resources that help reduce asymmetric information for strategic actions (Beckman, Haunschild, & Phillips, 2004), the same argument can be expanded to companies CEOs interactions (McDonald and Westphal, 2003). Gender Diversity on boards can promote a more optimistic environment, extend dialogues on strategic matters, and decrease conflicts and agency costs (Wilson, Wright, & Scholes, 2013)
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