Board diversity in the perspective of financial distress: Empirical evidence from the Netherlands

Abstract

This paper analyses the relationship between board diversity (in gender and in nationality) and financial distress. A summary of the theory behind board diversity precedes an overview of the empirical evidence on the relationship between diversity and company performance. The paper presents empirical research on the relationship between a negative performance measure, financial distress, and diversity on the board. The results show a positive relationship between the presence of foreign non-executive directors and financial distress. It is suggested that this is caused by negative communication and misunderstandings. No relationship is found between the gender of a director and financial distress. On a micro-level, the data do not show evidence for the glass cliff hypothesis.