Top management team and board attributes and firm performance in the Netherlands

We survey the evidence on the relationship between board and top management team attributes and firm performance in the Netherlands (sample of 94 listed firms). To this aim we develop hypotheses by using sources from the strategic management and the corporate governance literature. Dutch corporations generally have a two-tier board system. We use the size of the top management team (TMT) and their average age as well as the size of the supervisory board (RVC) and the percentage of outside members as attributes of corporate performance. Our base model consists of two performance indicators: a composite financial accounting measure (of ROA, ROS, and ROE) and a market- based indicator (standardized stock prize increase). Control variables are: log of total assets as an indicator of the size of a firm, leverage and adjusted cash flow/total assets as indicators of financial structure, coefficients of variation of sales and ROA as measures of environmental uncertainty (dynamics), and diversification as a measure of risk-spread. In general, we conclude for the year 1996, that by using the base model, direct linear and non-linear relationships between the TMT/board variables and performance are not existent. Also, the interaction effects with environmental dynamics as a moderating variable are tested. From this analysis it becomes evident that, although environmental uncertainty has a clear direct relationship with performance, it has no significance as a moderating variable. Only in one case the interaction with size of the board leads to a significant result. Indicating (instead of the hypothesized inverted U-shaped relationship) a U-shaped relationship between RVC and performance.

Stakeholder democracy as a katalyst to corporate value creation?

"Die Effektivität von Corporate Governance-Institutionen, insbesondere des Vorstands, wird aus drei theoretischen Perspektiven betrachtet. Corporate Governance-Designs reichen von autoritären Formen mit ungeteilter Autorität bzw. einem einzigen kontrollierenden Stakeholder bis hin zu demokratischen Formen mit geteilter Autorität und mehreren leitenden Stakeholdern. Die Unterscheidung zwischen der Verteilung des geschaffenen Werts und der Schaffung von Wert wird als wichtige moderierende Variable in die Analyse einbezogen. Wird die Verteilung des Werts betont, sollten Stakeholder sowohl nach Ansicht der erweiterten Principal Agent- als auch der Mediating Hierarchy-Perspektive nicht im Vorstand vertreten sein. Gemäß der Mediating Hierarchy-Perspektive ist es in Situationen mit Stimmrechtsübertragung außerdem am effektivsten, wenn alle Stakeholder ihre Kontrollrechte an den Vorstand abgeben, um beziehungsspezifische Investitionen zu ermöglichen. Konzentriert sich die Analyse auf die Schaffung von Wert, werden aus einer Strategic Contingency-Perspektive die Bindung und Loyalität von Stakeholdern zu ihrer Firma sowie ihre firmen- und branchenspezifische Erfahrung und Expertise als Schlüsselvariablen der Soft Governance berücksichtigt. Sofern diese Fähigkeiten über mehrere Stakeholder verteilt sind, wird die Effektivität der Governance verbessert, wenn diese Stakeholder im Vorstand vertreten sind." (Autorenreferat)"The effectiveness of institutions of internal corporate governance, in particular the board of directors, is addressed from three theoretical perspectives. Corporate governance designs range from authoritarian, a single authority or controlling stakeholder, to democratic, shared authority and more controlling stakeholders. The distinction between the distribution of value created and value creation is introduced in the analysis as a relevant moderating variable. In case the emphasis is on the distribution of value created both the extended principal-agent perspective and the mediating hierarchy perspective on the corporation argue that stakeholders should not be represented in the board. Second, by building upon the mediating hierarchy perspective, in situations of multiple enfranchised stakeholders, it is most effective that all stakeholders transfer their control rights to the board, to enable relationship-specific investments. In case the analysis shifts to value creation, a strategic contingency perspective on corporate governance introduces the commitment and loyalty of stakeholders to the firm and their firm-specific and industry-specific experience and expertise as key soft-governance variables in the analysis of effective board behaviour. To the extent that these capabilities are distributed over multiple stakeholders, the effectiveness of governance is increased by having these stakeholders represented in the board." (author's abstract

Top management team and board attributes and firm performance in the Netherlands

We survey the evidence on the relationship between board and top management team attributes and firm performance in the Netherlands (sample of 94 listed firms). To this aim we develop hypotheses by using sources from the strategic management and the corporate governance literature. Dutch corporations generally have a two-tier board system. We use the size of the top management team (TMT) and their average age as well as the size of the supervisory board (RVC) and the percentage of outside members as attributes of corporate performance. Our base model consists of two performance indicators: a composite financial accounting measure (of ROA, ROS, and ROE) and a market- based indicator (standardized stock prize increase). Control variables are: log of total assets as an indicator of the size of a firm, leverage and adjusted cash flow/total assets as indicators of financial structure, coefficients of variation of sales and ROA as measures of environmental uncertainty (dynamics), and diversification as a measure of risk-spread. In general, we conclude for the year 1996, that by using the base model, direct linear and non-linear relationships between the TMT/board variables and performance are not existent. Also, the interaction effects with environmental dynamics as a moderating variable are tested. From this analysis it becomes evident that, although environmental uncertainty has a clear direct relationship with performance, it has no significance as a moderating variable. Only in one case the interaction with size of the board leads to a significant result. Indicating (instead of the hypothesized inverted U-shaped relationship) a U-shaped relationship between RVC and performance.

Board Characteristics and Corporate Performance in the Netherlands

We analyze the performance-board characteristic nexus of Dutch listed firms. The Netherlands has a continental-European two-tier board structure. This makes it interesting to analyze the impact of management and supervisory board characteristics (size, composition and remuneration) on corporate performance. In Dutch corporate governance, the supervisory board plays a role in (anti-) investor protection. Subsequently, both board size and composition are variables that reflect corporate decision-making. In order to deal with this endogeneity problem, we use governance indicators such as (anti-) investor protection to endogenize board variables. Our results reveal that the size of the management board is not affecting corporate performance. We find support for a negative relationship between the supervisory board size and firm performance. Moreover, we observe a negative relationship between the proportion of supervisory board members with network ties to other organizations and performance.Corporate Governance; Firm; Firms; Governance; Management

Investor Protections and Concentrated Ownership: Assessing Corporate Control Mechanisms in the Netherlands

The Berle-Means problem - information and incentive asymmetries disrupting relations between knowledgeable managers and remote investors - has remained a durable issue engaging researchers since the 1930's. However, the Berle-Means paradigm - widely-dispersed, helpless investors facing strong, entrenched managers - is under stress in the wake of the cross-country evidence presented by La Porta, Lopez-de-Silanes, Shleifer, and Vishny and their legal approach to corporate control. This paper continues to investigate the roles of investor protections and concentrated ownership by examining firm behaviour in the Netherlands. Our within country analysis generates two key results. First, the role of investor protections emphasized in the legal approach is not sustained. Rather, we find that performance is enhanced when the firm is freed of equity market constraints, a result that we attribute to the relaxation of the myopia constraints imposed by relatively uninformed investors. Second, ownership concentration does not have a discernible impact on firm performance, which may reflect large shareholders' dual role in lowering the costs of managerial agency problems but raising the agency costs of expropriation.

Firm Performance, Financial Institutions and Corporate Governance in the Netherlands

This paper analyses the impact of share ownership, creditorship and networking by financial institutions on the performance of 94 Dutch non-financial firms in the period 1992-1996. We find a nonlinear relationship between firm performance and ownership by banks. Because of various defense mechanisms the role of the shareholder is very limited in the Netherlands. Financial institutions are, however, in a position to discipline firm management through other channels. It turns out that there is a direct positive link between share o wnership by banks and the firms` short-term bank loans, which indicates the existence of a financing channel. Financial institutions are also represented on the supervisory boards of firms and vice versa, which is an example of networking. This suggests that besides creditorship networking may be an additional disciplinary device for financial institutions. Here we find that there is a significant positive relationship between share ownership by insurance companies and pension funds and the probability of networking.

On the Contribution of New Keynesian Economics

In this paper we consider whether New Keynesian economics provides a meaningful framework for the analysis of the coordination problem in economic society. At this stage the New Keynesian coordination failure framework raises more questions than it provides answers. However, it has the potential to develop to an important area of macroeconomic research if subsequent research is directed toward the implications for economic performance of institutional characteristics of modern economies. In this respect the general equilibrium framework of New Keynesian economics is not appropriate. The analysis of coordination failures may benefit from insights that have been developed in the non-mainstream literature.Macroeconomics; New Keynesian