Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: In this paper the relation between ownership structure, board composition and firm performance is explored. A panel of Swedish listed firms is used to investigate how board composition affects firm performance. Board heterogeneity is measured as board size, age and gender diversity. The results show that Swedish board of directors have become more diversified in terms of gender. Also, fewer firms have the CEO on the board which can be interpreted as a sign of increased independency. The regression analysis shows that gender diversity has a small but negative effect on investment performance, and the same holds for CEO being on the board. The analysis also show that board size has a significant negative effect on investment performance. When incorporating all the explanatory variables into one equation however, the negative effect of larger boards dilutes the effect of gender diversity and having the CEO on the board.

Keywords: Corporate governance; board composition; investments performance; marginal q

JEL-codes: G30; L20; L21; L22; L25

28 pages, March 25, 2009

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