A study of the effectiveness of corporate governance in EU small states financial services firms

Abstract

The objective of this chapter is to uncover the factors that drive effective corporate governance in licensed financial services firms (FSFs) in seven small states of the European Union so as to explain what drives board behaviour. For the purpose of this study, small states are defined as those with a population of three about three million or less. Cyprus, Malta, Luxembourg, Lithuania, Slovenia, Latvia and Estonia fall into this category. The approach adopted in this study was to conduct a survey to derive a Board Effectiveness Measure (BEM) with the secretaries of 164 Boards of Directors (BODs) in the seven small states under consideration to assess the drivers of BOD effectiveness. We then used a number of objective criteria to test the statistical relationship of these criteria with Board effectiveness. Among other findings, the study revealed that the BODs’ Effectiveness Measure (BEM) increased with the academic level of the directors and the number of Boards on which Board members are approved.