All on Board? New Evidence on Board Characteristics from a Large Panel of UK FTSE Indices

Abstract

This study analyses whether the board characteristics (diversity attributes, competitive capital, time commitment) of companies listed on the Financial Times Stock Exchange FTSE100 exhibit a different performance compared to those associated with conventional benchmark indices (FTSE250, FTSE SMALLCAP (small capitalisation), FTSE Fledgling, and FTSE All-Shar). Using multivariate analysis and unbalanced panel data over the period 2000−2014, we provide novel evidence on how the UK stock market indices react to diversity in board characteristics. Our findings reveal that different aspects of board characteristics are significantly correlated with the performance of FTSE indices. This study further confirms that boards with high levels of diversity maintain better and more effective levels of governance, in particular for companies listed on FTSE100 and FTSE250. Interestingly, we report that the competitive capital and busyness associated with boards of companies listed on FTSE100 have professional, well-educated, and socially connected boards, and show a clear pattern whereby boards become significantly less competitive as firm size decreases.