The Influence of Board Characteristics on Financial Performance: Evidence From S&P 500 Healthcare Companies

Abstract

The field of corporate finance is constantly changing, with a strong focus on various performance metrics. This study examines 64 healthcare companies listed on the S&P 500 index over the period from 2014 to 2023. Using a range of analytical techniques, including linear and nonlinear regression models, as well as interaction-based models, this research seeks to uncover the effects of key corporate governance factors on profitability. The analysis reveals that board size has a consistently negative impact on the performance of these healthcare companies, regardless of whether the period is marked by crisis or stability. Moreover, the frequency of annual board meetings also negatively affected financial performance; however, this relationship shifted to a positive impact during crisis periods. The study further underscores the significant role of gender diversity within companies. Gender diversity demonstrated a positive influence on performance, particularly during crises. Conversely, board independence, while beneficial in non-crisis periods, showed a negative effect during crises. The research also identified a turning point for board independence, indicating that the optimal level of independence may vary depending on the context. Overall, this study provides insights into how various corporate governance policies impact financial performance, transparency, and shareholder protection. It highlights the importance of evaluating board characteristics, including size, meeting frequency, diversity, and independence, to understand their effects on company performance. The findings emphasize the need for companies to adapt their corporate governance strategies in response to evolving conditions to maintain robust financial health and effective leadership. DOI: https://doi.org/10.53486/dri2024.45; UDC: [658.15:005.742]:[614.21:005.931.1]; JEL: G30, G34, G39