Abstract:

The purpose of this study is to examine the relationships between board composition and financial vulnerability of non-profit organizations in Malaysia. Information on these variables is obtained from the content analysis of annual reports of 205 societies registered with Registrar of Societies in Malaysia for the financial period 2010. Results of this study revealed significant relationships between some board compositions and some measures of financial vulnerabilities. First, there is a significant positive relationship between board members with professional affiliations and solvency. Second, there is a negative relationship between board members with political connections and efficiency as well as solvency. These findings indicate that types of directors on the board are important as they bring specific critical resources to match the specific environmental needs facing the organizations. In addition, the findings also provide useful information that can facilitate screening, monitoring, and decision making processes for various stakeholders.