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.