JultikaUniversity of Oulu repository

Board composition plays a significant role in corporate governance; the board is responsible for making strategic, tactical and operational decisions for the company on behalf of the shareholders and the stakeholders. This study examined the effect of some corporate board composition characteristics on the performance of listed firms in Nordic Countries (Finland, Sweden, Denmark and Norway) from 2012 to 2016. Although each country in the Nordic region has its Corporate Governance Codes, Nordic corporate governance code also known as ‘Nordic Model’ provides some recommendations for Nordic countries. The suggestions in this model are similar to the individual corporate governance code of each country. The rule stipulated that board should be independent of the company; hence, the majority of the Nordic listed corporations have entirely or predominantly non-executive boards. Further, there should be fair representation of gender diversity on board and members should have necessary skill and experience to perform efficiently. The analysis was carried out on the sample of 552 firm-year observations. Starting with descriptive statistics of data, followed by Pearson’s correlation analysis and then OLS regression. The analysis was done by examining the impact of board composition characteristics, board size, gender diversity, board independence and board experience on firm performance (ROA) while controlling for variables of firm size, leverage, and liquidity. An additional test was performed by adding another control variable to examine the effect of industry type. The industry variable gets a value of one or zero for each classification. The regression result of the industry effect remained the same as the original OLS regression result. The coefficient retained the same positive or negative signs. The OLS result shows a significant association between board size and firm performance. This implies that board size of Nordic listed firms has an impact on firm performance. However, the result of gender diversity reported no significant relationship between the percentage of female representation on board and firm performance. Regarding the impact of board independence on firm performance, the OLS result shows a positive association between board independence and firm performance. Concerning board experience, the result shows a significant positive association between board experience and firm performance. The results of this study are in line with previous studies. This study has relevant implications for management, shareholders as well as academicians on corporate boards and corporate performance. The result will enable the Nordic listed firms’ management and policymakers to make a better decision on issues regarding board composition. Also, both existing and potential shareholders can assess the board composition to make a better decision on their investment. Further, the result of this study provides evidence to corporate governance theories, thereby, indicating the needs for corporate governance regulators to gain more insight into board’s functioning.