Board composition and corporate governance–A multivariate analysis of listed Danish firms

Abstract

The article conducts a multivariate analysis using a sample of listed Danish firms in order to examine what describes board composition. This issue also relates to corporate law that stipulates the legal boundaries of board composition. In recent years, several European countries, including Denmark, have issued various codes for good corporate governance, in the form of soft law. Such initiatives have been launched, even though the questions of what describes board composition, as well as, the legal profession's influence on board structure, have not been fully uncovered. This study shows that four factors explain Danish board structure. These factors can be interpreted by the following dimensions; the lawyer oriented, the business person oriented, the internationally oriented and finally the traditionally oriented board. Thus, the paper shows that a higher proportion of insider ownership increases the first dimension, whereas a higher remuneration increases the business person orientation of the board. If firm size increases, the international dimension of the board increases and if a firm experiences less growth board structure becomes more traditional.