Failures in governance, especially in regard to boards of directors, have been blamed for the 2007-2008
financial crisis. The increased public scrutiny regarding the actions and role of the board of directors in
banks, following the crisis, inspires to examine whether and to what extent the characteristics of banks’
boards influence their performance in the crisis. Using a sample of 72 publicly listed European banks, we
find that banks with more independent and busy boards experienced worse stock returns during the crisis.
Conversely, the better performing banks had more banking experts serving as supervisory directors.
Additionally, we find that gender and age diversity improved banks’ performance during the crisis; hence,
diversity matters. We also construct a governance quality index on the basis of board characteristics and
conclude that governance quality positively affects banks’ returns during the crisis. Overall, we find
evidence that banks’ performance during the financial crisis is a function of their boards’ characteristics.
