Abstract
This paper examines the impact of board diversity, CEO characteristics, and board committees on the financial performance of the companies listed on the Bucharest Stock Exchange (BSE). In order to test the influence of these characteristics, detailed data on more than 70 firms are collected by hand, for the 2016–2020 period, and comprehensive regression models are estimated. The findings show that there are positive effects of board diversity especially with regard to the independent board members. In terms of the board committees, the audit committee is found to have a favourable influence. The regression coefficients imply that a 10% increase in the share of independent board members would be associated with a 0.93% increase in ROE. Based on these findings, it can be argued that improving the corporate governance practices of the companies listed on the BSE would increase the performance and the value of these firms.
Highlights
Academic Editor: Thanasis StengosCorporate governance has a great influence in determining the efficient management of businesses, with a focus on balancing and reconciling the interests of different stakeholders surrounding companies (Solomon 2020)
The results of the paper are important for policy and managerial purposes in the sense that the findings of the papers produce important policy recommendations—namely, these results indicate that improving corporate governance practices by having independent board members and audit committees would be favourable for the financial performance of companies in the Bucharest Stock Exchange
The lowest levels of board diversity are observed on foreigners and women, while the largest diversity level is observed in the non-executive members
Summary
Corporate governance has a great influence in determining the efficient management of businesses, with a focus on balancing and reconciling the interests of different stakeholders surrounding companies (Solomon 2020). These areas are the board diversity (in terms of the shares of the non-executive, independent, women, and foreigner board members), CEO characteristics (e.g., CEO duality, gender, and ethnicity), and board committees. In this way, the paper provides a comprehensive account of the effects of these corporate governance dimensions on firm performance in Romania.
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