Johann Valentowitsch, Michael Kindig and Wolfgang Burr
The effects of board composition on performance have long been discussed in management research using fractionalization measures. In this study, we propose an alternative…
Abstract
Purpose
The effects of board composition on performance have long been discussed in management research using fractionalization measures. In this study, we propose an alternative measurement approach based on board polarization.
Design/methodology/approach
Using an exploratory analysis and applying the polarization measure to German Deutscher Aktienindex (DAX)-, Midcap-DAX (MDAX)- and Small Cap-Index (SDAX)-listed companies, this paper applies the polarization index to examine the relationship between board diversity and performance.
Findings
The results show that the polarization concept is well suited to measure principal-agent problems between the members of the management and supervisory boards. We reveal that board polarization is negatively associated with firm performance, as measured by return on investment (ROI).
Originality/value
This exploratory study shows that the measurement of board polarization can be linked to performance differences between companies, which offers promising starting points for further research.
Details
Keywords
Gilbert Lenssen, Luk Van Wassenhove, Simon Pickard and Joris-Johann Lenssen