Bank Ownership, Board Characteristics and Performance: Evidence from Commercial Banks in India †
Abstract
:1. Introduction
2. Regulatory Structure and Governance Setup of Indian Banks
3. Data and Methods
3.1. Data
3.2. Empirical Methodology
dummies(it) + δ’*control variables(it) + ε(it)
3.2.1. Dependent Variable: Bank Outcomes
3.2.2. Variables of Interest: Board Characteristics and Ownership Dummies
3.2.3. Control Variables
3.3. Descriptive Statistics
4. Regression Results
4.1. Baseline Regression
4.2. Board Characteristics and Bank Outcomes
4.2.1. Board Characteristics and Bank Profitability
4.2.2. Board Characteristics and Bank Valuation
4.2.3. Endogeneity
4.2.4. Board Characteristics and Bank Asset Quality
4.3. Tenure of Chief Executive Officer and Bank Outcomes
5. Conclusions
Author Contributions
Conflicts of Interest
References
- Adams, Renee B. 2009. Asking Directors about Their Dual Roles. Unpublished Working Paper. Brisbane: University of Queensland. [Google Scholar]
- Adams, Renee B., and Daniel Ferreira. 2007. A theory of friendly boards. Journal of Finance 62: 217–50. [Google Scholar] [CrossRef]
- Adams, Renee B., and Hamid Mehran. 2012. Bank board structure and performance: Evidence for large bank holding companies. Journal of Financial Intermediation 21: 243–67. [Google Scholar] [CrossRef]
- Adams, Renee B., Benjamin E. Hermalin, and Michael S. Weisbach. 2010. The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey. Journal of Economic Literature 48: 58–107. [Google Scholar] [CrossRef]
- Aebi, Vincent, Gabriele Sabato, and Markus Schmid. 2012. Risk management, corporate governance and bank performance in the financial crisis. Journal of Banking & Finance 36: 3213–26. [Google Scholar]
- Agrawal, Anup, and Charles R. Knoeber. 1996. Firm performance and mechanisms to control agency problems between managers and shareholders. The Journal of Financial and Quantitatvie Economics 3: 377–97. [Google Scholar] [CrossRef]
- Andres, Pablo de, and Eleuterio Vallelado. 2008. Corporate governance in banking: The role of the board of directors. Journal of Banking & Finance 32: 2570–80. [Google Scholar]
- Andrews, Michael. 2005. State-Owned Banks, Stability, Privatization, and Growth: Practical Policy Decisions in a World without Empirical Proof. Washington: International Monetary Fund. [Google Scholar]
- Basel. 2010. Principles for Enhancing Corporate Governance. Basel: Bank for International Settlements. [Google Scholar]
- Belkhir, Mohamed. 2009. Board of Directors’ Size and Performance in the Banking Industry. International Journal of Managerial Finance 5: 201–21. [Google Scholar] [CrossRef]
- Berger, Allen N., Iftekhar Hasan, and Mingming Zhou. 2010. The effects of focus versus diversification on bank performance: Evidence from Chinese banks. Journal of Banking & Finance 34: 1417–35. [Google Scholar]
- Bertrand, Marianne, Paras Mehta, and Sendhil Mullainathan. 2002. Ferreting out tunneling: An application to Indian business groups. Quarterly Journal of Economics 1: 121–48. [Google Scholar] [CrossRef]
- Bhagat, Sanjai, and Bernard S Black. 2002. The non-correlation between board independence and long-term firm performance. Journal of Corporation Law 27: 231–73. [Google Scholar] [CrossRef]
- Bhagat, Sanjai, James A. Brickley, and Jeffrey L. Coles. 1987. Managerial indemnification and liability insurance: The effect of shareholder wealth. Journal of Risk and Insurance 55: 721–36. [Google Scholar] [CrossRef]
- Bhaumik, Sumon, and Ralitza Dimova. 2004. How important is ownership in a market with level playing field? The Indian banking sector revisited. Journal of Comparative Economics 32: 165–80. [Google Scholar] [CrossRef]
- Brickley, James A., Jeffrey L. Coles, and Gregg Jarrell. 1997. Leadership structure: Separating the CEO and chairman of the board. Journal of Corporate Finance 3: 189–220. [Google Scholar] [CrossRef]
- Busta, Ilduara. 2007. Board effectiveness and the impact of the legal family in the European banking industry. Paper presented at 2007 FMA European Conference, Barcelona, Spain, May 30–June 1. [Google Scholar]
- Carcello, Joseph, Diana R. Hermanson, Terry L. Neal, and Richard A. Riley Jr. 2002. Board characteristics and audit fees. Contemporary Accounting Research 19: 365–84. [Google Scholar] [CrossRef]
- Cornett, Marcia Millon, Jamie John McNutt, and Hassan Tehranian. 2009. Corporate governance and earnings management at large U.S. bank holding companies. Journal of Corporate Finance 15: 412–30. [Google Scholar] [CrossRef]
- Desender, Kurt A., Ruth V. Aguilera, Rafel Crespi, and Miguel Garcia-Cestona. 2013. When does ownership matter? Board characteristics and behaviour. Strategic Management Journal 34: 823–42. [Google Scholar] [CrossRef]
- Donaldson, Lex, and James H. Davis. 1991. Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management 16: 49–65. [Google Scholar] [CrossRef]
- Eisenberg, Theodore, Stefan Sundgren, and Martin T. Wells. 1998. Larger board size and decreasing firm value in small firms. Journal of Financial Economics 48: 35–54. [Google Scholar] [CrossRef]
- Erkens, David H., Mingyi Hung, and Pedro Matos. 2012. Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide. Journal of Corporate Finance 18: 389–411. [Google Scholar] [CrossRef]
- Faleye, Olubunmi, and Karthik Krishnan. 2017. Risky lending: Does bank corporate governance matter? Journal of Banking & Finance 83: 57–69. [Google Scholar]
- Faleye, Olubunmi, Rani Hoitash, and Udi Hoitash. 2011. The costs of intense board monitoring. Journal of Financial Economics 101: 160–81. [Google Scholar] [CrossRef]
- Fama, Eugene F. 1980. Agency problems and the theory of the firm. Journal of Political Economy 88: 288–307. [Google Scholar] [CrossRef]
- Ferris, Stephen, Murali Jagannathan, and Adam C. Pritchard. 2003. Too busy to mind business? Monitoring by directors with multiple board appointments. Journal of Finance 58: 1087–111. [Google Scholar] [CrossRef]
- Fink, Rachel A. 2006. Social ties in the boardroom: Changing the definition of director independence to eliminate rubber stamping boards. Southern California Law Review 79: 455–96. [Google Scholar]
- García-Herrero, Alicia, Sergio Gavilá, and Daniel Santabárbara. 2009. What explains the low profitability of Chinese banks? Journal of Banking & Finance 33: 2080–92. [Google Scholar]
- Grove, Hugh, Lorenzo Patelli, Lise M. Victoravich, and Pisub (Tracy) Xu. 2011. Corporate governance and performance in the wake of the financial crisis: Evidence from US commercial banks. Corporate Governance: An International Review 19: 418–36. [Google Scholar] [CrossRef]
- Haan, Jakob, and Razvan Vlahu. 2016. Corporate governance of banks: A survey. Journal of Economic Surveys 30: 228–77. [Google Scholar] [CrossRef]
- Hermalin, Benjamin E., and Michael S. Weisbach. 1991. The Effects of Board Composition and Direct Incentives on Firm Performance. The Journal of the Financial Management Association 20: 101–12. [Google Scholar] [CrossRef]
- Holmstrom, Bengt. 2005. Pay without Performance and the Managerial Power Hypothesis: A Comment. Journal of Corporation Law 30: 703–13. [Google Scholar] [CrossRef]
- Kirkpatrick, Colin. 2009. Corporate Governance Lessons from the Financial Crisis. Financial Market Trends 96: 52–81. [Google Scholar] [CrossRef]
- La Porta, Rafael, Florencio Lopez-De Silanes, and Andrei Shleifer. 2002. Government Ownership of Banks. Journal of Finance 57: 265–301. [Google Scholar] [CrossRef]
- Laeven, Luc. 2013. Corporate Governance: What’s Special about Banks? Annual Review of Financial Economics 5: 63–92. [Google Scholar] [CrossRef]
- Larcker, David F., Gaizka Ormazabala, and Daniel J. Taylor. 2011. The market reaction to corporate governance regulation. Journal of Financial Economics 101: 431–48. [Google Scholar] [CrossRef]
- Levine, Ross. 2004. The Corporate Governance of Banks: A Concise Discussion of Concepts and Evidence. Working Paper. Washington: World Bank. [Google Scholar]
- Liang, Qi, Pisun Xu, and Pornsit Jiraporn. 2013. Board characteristics and Chinese bank performance. Journal of Banking & Finance 37: 2953–68. [Google Scholar]
- Lin, X., and Y. Zhang. 2009. Bank ownership reform and bank performance in China. Journal of Banking & Finance 33: 20–29. [Google Scholar] [CrossRef]
- Macey, Jonathan R., and Maureen O’Hara. 2003. The corporate governance of banks. Federal Reserve Bank of New York. Economic Policy Review 42: 91–107. [Google Scholar]
- Megginson, William L., and Jeffry M. Netter. 2001. From State to Market: A Survey of Empirical Studies on Privatization. Journal of Economic Literature 39: 321–89. [Google Scholar] [CrossRef]
- Mishra, C., and James Nielsen. 2000. Board independence and compensation policies in large bank holding companies. Financial Management 29: 51–69. [Google Scholar] [CrossRef]
- Morck, Randall. 2004. Generalized agency problems. SSRN Electronic Journal. [Google Scholar] [CrossRef]
- Nachane, Dilip M., Saibal Ghosh, and Partha Ray. 2005. Bank nominee directors and corporate performance Micro-evidence for India. Economic and Political Weekly 19: 1216–23. [Google Scholar]
- Nayak, Jayendra. 2014. Committee to Review Governance of Boards of Banks in India. Mumbai: Reserve Bank of India. [Google Scholar]
- O’Sullivan, Jennifer, Abdullah Mamun, and M. Kabir Hassan. 2016. The relationship between board characteristics and performance of bank holding companies: Before and during the financial crisis. Journal of Economics and Finance 40: 438–71. [Google Scholar] [CrossRef]
- OECD. 2010. OECD Principles of Corporate Governance. Paris: OECD. [Google Scholar]
- Pathan, Shams. 2009. Strong boards, CEO power and bank risk-taking. Journal of Banking & Finance 33: 1340–50. [Google Scholar] [CrossRef]
- Peng, Mike W., Shujun Zhang, and Xinchun Li. 2007. CEO Duality and Firm Performance during China’s Institutional Transitions. Management and Organization Review 3: 205–25. [Google Scholar] [CrossRef]
- Pfeffer, Jeffrey. 1972. Size and composition of corporate boards of directors. Administrative Science Quarterly 17: 218–29. [Google Scholar] [CrossRef]
- Pi, Lynn, and Stephen G. Timme. 1993. Corporate control and bank efficiency. Journal of Banking & Finance 17: 515–30. [Google Scholar]
- Reserve Bank of India (RBI). 1949. The Banking Regulation Act. Mumbai: RBI. [Google Scholar]
- Rechner, Paula L., and Dan R. Dalton. 1991. CEO duality and organizational performance: A longitudinal analysis. Strategic Management Journal 12: 155–60. [Google Scholar] [CrossRef]
- Reinhart, Carmen M., and Kenneth S. Rogoff. 2010. Growth in a time of debt. American Economic Review 100: 573–78. [Google Scholar] [CrossRef] [Green Version]
- Ring, Peter S., and James L. Perry. 1985. Strategic management in public and private organizations: Implications of distinctive contexts and constraints. Academy of Management Review 10: 276–86. [Google Scholar]
- Sarkar, Jayati. 2004. The Indian Banking Industry. In The Structure of Indian Industry. Edited by Subir Gokarn, Anindya Sen and Rajendra R. Vaidya. New Delhi: Oxford University Press. [Google Scholar]
- Sarkar, Jayati, and Subrata Sarkar. 2009. Multiple board appointments and firm performance in emerging economies: Evidence from India. Pacific Basin Finance Journal 17: 271–93. [Google Scholar] [CrossRef]
- Sarkar, Jayati, Subrata Sarkar, and Sumon Bhaumik. 1998. Does Ownership Always Matter?—Evidence from the Indian Banking Industry. Journal of Comparative Economics 26: 262–81. [Google Scholar] [CrossRef]
- Sarkar, Jayati, Subrata Sarkar, and Kaustav Sen. 2008. Board of Directors and Opportunistic Earnings Management: Evidence from India. Journal of Accounting, Auditing and Finance 23: 189–208. [Google Scholar] [CrossRef]
- Shleifer, Andrei, and Robert W. Vishny. 1994. Politicians and firms. Quarterly Journal of Economics 109: 995–1025. [Google Scholar] [CrossRef]
- Staikouras, Panagiotis, C. Staikouras, and Maria E. Agoraki. 2007. The effect of board size and composition on European bank performance. European Journal of Law and Economics 23: 1–27. [Google Scholar] [CrossRef]
- Walker, David. 2009. A Review of Corporate Governance in UK Banks and Other Financial Industry Entities: Final Recommendations; London: Government of UK.
- Weisbach, Michael S. 1988. Outside directors and CEO turnover. Journal of Financial Economics 20: 431–60. [Google Scholar] [CrossRef]
- Yang, T., and S. Zhao. 2014. CEO duality and firm performance: Evidence from an exogenous shock to the competitive environment. Journal of Banking & Finance 49: 534–52. [Google Scholar]
- Yermack, David. 1996. Higher market valuation of companies with a small board of directors. Journal of Financial Economics 40: 185–211. [Google Scholar] [CrossRef]
1 | For a recent survey of the literature, see Adams et al. (2010). |
2 | The theoretical underpinnings of this finding stem from the argument that independent directors have competing demands on their time to be devoted to monitoring and advising functions. If greater time is devoted by independent directors to intense monitoring then it adversely impacts their ability to create firm value due to a variety of reasons including cutting down on time for advising activities, weakening the trust between CEOs and independent directors and discouraging the former from sharing strategic information with the latter for their advisory activities (Holmstrom 2005; Adams and Ferreira 2007). |
3 | |
4 | The Indian banking comprises of commercial banks and co-operative banks with commercial banks dominating the quantum of the banking business with a market share of more than 95% at the end of March 2012. Commercial banks in turn comprise of scheduled banks and non-scheduled banks with the former being subject to certain statutory requirements such as minimum paid-up capital. The number of non-scheduled banks has dwindled over the years and stands at four at present with scheduled commercial banks accounting for more than 97% of total commercial banking operations. |
5 | At the end of March 2012, the regional rural banks accounted for less than four per cent of total banking business of state-owned banks. |
6 | The new private banks were set up post 1991 at the time of liberalization of the Indian economy. These banks have since then grown rapidly compared to the old private banks. As on 31 March 2012, the deposit share of new private banks was 14 percent compared to the combined share of 11 percent of old private banks and foreign banks. |
7 | These relate to the Board of Directors, namely the inclusion of persons with professional and other experiences (10-A), the provision to have a whole-time chairman(10-B), the power of the RBI to appoint chairman of a Banking Company (10-BB), the chairman and managing director not to be required to hold qualification shares (10-C), the election of new directors (12-A), the power of RBI to remove managerial and other persons from office (36-AA) and the power of the RBI to appoint additional directors. |
8 | As the Nayak Committee (Nayak 2014) notes, the chairman and managing director of state-owned banks typically get appointed very close to their retirement age of 60, the tenure of most of the top executives do not exceed two years. |
9 | These banks together accounted for over 90% of the total deposits and total advances of the banking system in 2012. |
10 | Nominee directors are in addition to the independent directors that are appointed by the government by virtue of its equity ownership. |
11 | In using three as the cut-off for busy directors we apply the most conservative definition of busyness that has been used in several US studies. This rule of thumb largely follows the recommendation of the Council of Institutional Investors in the US. |
12 | While information on financial and stock market variables is relatively complete, data on board characteristics are missing due to non-filing of corporate governance reports by some banks especially in the early years of our sample. Accordingly, although we have potentially 460 bank year observations (46 banks × 10 years), our sample is an unbalanced panel of 267 bank-year observations. |
13 | Since the standard measures of assets quality all look at the proportion of non-performing assets rather than performing assets, a negative sign indicates better quality of assets. |
14 | We also interacted Boardsize with the two ownership dummy variables but none of the interaction coefficients were significant while the coefficient on Boardsize continued to remain insignificant. We do not report these results separately to conserve space. |
15 | We get the most number of observations for state-owned banks for this year during the period of (2003 to 2006). Also, new corporate governance reforms, especially with respect to board governance, came into effect from 1 January 2006 (SEBI Circular, (SEBI/CFD/DIL/CG/1/2005/29/3), 29 March 2005). |
Variable Name | Description |
---|---|
Roa | Rate of return on assets: PBDIT to total assets (%) |
Mbvr | Market to book value ratio: price to book value of equity (ratio) |
Nnpa_ttladv | Net non-performing assets to total loans and advances (%) |
Gnpa_ttladv | Gross non-performing assets to total loans and advances (%) |
Nnpa_additn_ttladv | Addition of net non-performing assets to total loans and advances (%) |
Gnpa_additn_ttladv | Addition of gross non-performing assets to total loans and advances (%) |
Boardsize | Board size: number of directors on the board |
Board Independence | Board independence: percentage of independent directors on the board |
Busy Director | Dummy variable, equals 1 if board has at least one director with three or more directorships |
Director Attendance | Percentage of independent directors who attended the AGM |
Ceo Duality | Dummy variable, equals 1 if the same person holds the position of CEO and chairman |
Nominee Director | Dummy variable, equals 1 if the board has a nominee director |
Oprivate | Dummy variable, equals 1 for old private banks |
Nprivate | Dummy variable, equals 1 for new private banks |
Loans to Assets | Percentage of loans and advances to total assets |
Log Assets | Log of total assets |
Priority Sector Lending | Percentage of priority sector lending to total loans and advances |
Ceo Tenure | Tenure of the chief executive office in years |
Trend Nnpa_wrtoffs_ttladv Gnpa_wrtoffs_ttladv Npa_provsn_ttladv | Trend variable takes the value 1 for the first year of the sample, 2 for the second year and so on Write offs of net non-performing assets to total loans and advances (%) Write offs of gross non-performing assets to total loans and advances (%) Provisions for non-performing assets to total loans and advances (%) |
Ownership Groups | |||||
---|---|---|---|---|---|
State-Owned | Old Private | New Private | All | ||
Panel A: Bank Outcomes and Bank Characteristics | |||||
Roa | Mean | 1.00 | 1.11 | 1.29 | 1.09 |
Median | 1.01 | 1.15 | 1.45 | 1.10 | |
Mbvr | Mean | 1.13 | 1.24 | 3.06 | 1.58 |
Median | 1.09 | 1.28 | 2.87 | 1.26 | |
Nnpa_ttladv | Mean | 1.28 | 1.19 | 0.91 | 1.18 |
Median | 1.07 | 1.07 | 0.61 | 0.96 | |
Gnpa_ttladv | Mean | 3.30 | 3.34 | 2.30 | 3.09 |
Median | 2.50 | 2.54 | 1.57 | 2.36 | |
Nnpa_additn_ttladv | Mean | 1.06 | 1.12 | 0.67 | 0.98 |
Median | 0.98 | 1.10 | 0.47 | 0.86 | |
Gnpa_additn_ttladv | Mean | 1.94 | 1.63 | 1.78 | 1.84 |
Median | 1.75 | 1.54 | 1.27 | 1.62 | |
Loans to Assets | Mean | 58.28 | 56.99 | 54.27 | 57.12 |
Median | 59.92 | 58.09 | 55.97 | 58.32 | |
Log Assets | Mean | 13.84 | 12.35 | 13.20 | 13.39 |
Median | 13.79 | 12.34 | 13.15 | 13.38 | |
Priority Sector Lending | Mean | 37.27 | 36.50 | 34.77 | 36.56 |
Median | 37.01 | 37.99 | 34.88 | 36.69 | |
Panel B: Board Characteristics | |||||
Boardsize | Mean | 8.08 | 9.95 | 11.14 | 9.14 |
Median | 8.00 | 10.00 | 11.00 | 9.00 | |
Board Independence | Mean | 54.79 | 68.29 | 64.70 | 59.76 |
Median | 58.33 | 75.00 | 66.67 | 62.50 | |
Busy Director | Mean | 0.55 | 0.71 | 1.00 | 0.68 |
Median | 1.00 | 1.00 | 1.00 | 1.00 | |
Director Attendance | Mean | 43.04 | 81.97 | 63.34 | 57.53 |
Median | 50.00 | 84.52 | 60.00 | 60.00 | |
Ceo Duality | Mean | 0.90 | 0.51 | 0.12 | 0.64 |
Median | 1.00 | 1.00 | 0.00 | 1.00 | |
Nominee Director | Mean | 0.98 | 0.11 | 0.27 | 0.64 |
Median | 1.00 | 0.00 | 0.00 | 1.00 | |
Sample Size * | N | 153 | 55 | 59 | 267 |
Dependent Variable | ||||||
---|---|---|---|---|---|---|
Financial Performance | Asset Quality | |||||
Roa | Mbvr | Nnpa_ttladv | Gnpa_ttladv | Nnpa_additn_ttladv | Gnpa_additn_ttladv | |
Intercept | −1.586 ** | −2.813 ** | 1.712 | −0.615 | 0.600 | 3.780 ** |
(0.018) | (0.011) | (0.213) | (0.832) | (0.575) | (0.017) | |
Oprivate | 0.310 *** | 0.401 *** | −0.187 | −0.037 | 0.094 | −0.501 ** |
(0.001) | (0.006) | (0.304) | (0.923) | (0.506) | (0.017) | |
Nprivate | 0.410 *** | 2.157 *** | −0.432 *** | −0.773 ** | −0.381 *** | −0.298 * |
(0.001) | (0.001) | (0.005) | (0.016) | (0.001) | (0.088) | |
Log Assets | 0.141 *** | 0.182 *** | 0.002 | 0.081 | 0.042 | −0.098 |
(0.001) | (0.004) | (0.981) | (0.622) | (0.491) | (0.278) | |
Loans to Assets | 0.012 * | 0.025 ** | −0.002 | −0.124 *** | 0.005 | 0.003 |
(0.100) | (0.047) | (0.889) | (0.000) | (0.671) | (0.857) | |
Priority Sector Lending | 0.017 *** | 0.031 *** | 0.007 | 0.055 ** | 0.003 | −0.005 |
(0.002) | (0.001) | (0.547) | (0.023) | (0.776) | (0.699) | |
Year Effects | Yes | Yes | Yes | Yes | Yes | Yes |
No. of Obs. | 267 | 267 | 267 | 267 | 267 | 267 |
Adj. R2 | 0.13 | 0.60 | 0.25 | 0.44 | 0.13 | 0.10 |
Pr. > F | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 |
Column | Column | Column | Column | Column | |
---|---|---|---|---|---|
(i) | (ii) | (iii) | (iv) | (v) | |
Intercept | −1.300 ** | −1.268 * | −0.571 | −0.440 | −0.918 |
(0.054) | (0.060) | (0.427) | (0.542) | (0.201) | |
Boardsize | −0.010 | −0.006 | −0.015 | −0.022 * | −0.018 |
(0.352) | (0.580) | (0.195) | (0.062) | (0.122) | |
Board Independence | −0.001 | −0.001 | −0.002 | −0.001 | 0.001 |
(0.370) | (0.474) | (0.297) | (0.910) | (0.426) | |
Board Independence x Oprivate | 0.005 *** | 0.005 *** | 0.005 *** | 0.004 ** | 0.004 ** |
(0.001) | (0.001) | (0.001) | (0.003) | (0.003) | |
Board Independence x Nprivate | 0.006 *** | 0.006 *** | 0.007 *** | 0.004 ** | 0.006 *** |
(0.001) | (0.001) | (0.001) | (0.025) | (0.001) | |
Busy Director | −0.102 | −0.069 | −0.097 | −0.122 * | |
(0.120) | (0.318) | (0.164) | (0.075) | ||
Director Attendance | −0.001 | −0.001 | −0.002 | ||
(0.479) | (0.287) | (0.163) | |||
Ceo Duality | −0.298 ** | −0.236 ** | |||
(0.013) | (0.045) | ||||
Ceo Duality x Oprivate | 0.451 *** | 0.393 *** | |||
(0.007) | (0.014) | ||||
Ceo Duality x Nprivate | 0.288 ** | 0.440 ** | |||
(0.041) | (0.035) | ||||
Nominee Director | −0.367 *** | ||||
(0.001) | |||||
Loans to Assets | 0.011 | 0.011 | 0.015 * | 0.015 * | 0.014 * |
(0.147) | (0.147) | (0.083) | (0.077) | (0.086) | |
Log Assets | 0.133 *** | 0.134 *** | 0.094 ** | 0.106 *** | 0.155 *** |
(0.001) | (0.001) | (0.020) | (0.001) | (0.001) | |
Priority Sector Lending | 0.017 *** | 0.016 *** | 0.016 *** | 0.015 ** | 0.014 ** |
(0.001) | (0.006) | (0.010) | (0.013) | (0.020) | |
Year Effects | Yes | Yes | Yes | Yes | Yes |
No. of Obs. | 267 | 267 | 225 | 225 | 225 |
Adj. R2 | 0.11 | 0.11 | 0.16 | 0.18 | 0.22 |
Pr. > F | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 |
Column | Column | Column | Column | Column | |
---|---|---|---|---|---|
(i) | (ii) | (iii) | (iv) | (v) | |
Intercept | 0.007 | −0.070 | −0.326 | 0.115 | −0.570 |
(0.995) | (0.954) | (0.813) | (0.933) | (0.677) | |
Boardsize | 0.009 | −0.001 | −0.013 | −0.035 | −0.029 |
(0.652) | (0.978) | (0.565) | (0.111) | (0.181) | |
Board Independence | −0.013 *** | −0.014 *** | −0.016 *** | −0.013 *** | −0.011 *** |
(0.001) | (0.001) | (0.001) | (0.001) | (0.002) | |
Board Independence x Oprivate | 0.005 * | 0.004 * | 0.003 | −0.003 | −0.007 * |
(0.058) | (0.058) | (0.296) | (0.398) | (0.076) | |
Board Independence x Nprivate | 0.030 *** | 0.029 *** | 0.030 *** | 0.021 *** | 0.016 *** |
(0.001) | (0.001) | (0.001) | (0.001) | (0.001) | |
Busy Director | 0.242 ** | 0.181 | 0.085 | 0.049 | |
(0.040) | (0.172) | (0.518) | (0.707) | ||
Director Attendance | 0.005 ** | 0.003 | 0.003 | ||
(0.044) | (0.116) | (0.175) | |||
Ceo Duality | −0.801 *** | −0.712 *** | |||
(0.001) | (0.002) | ||||
Ceo Duality x Oprivate | 0.478 | 0.396 | |||
(0.124) | (0.199) | ||||
Ceo Duality x Nprivate | 0.594 ** | 0.811 ** | |||
(0.038) | (0.042) | ||||
Nominee Director | −0.525 ** | ||||
(0.012) | |||||
Loans to Assets | 0.005 | 0.005 | −0.016 | −0.019 | −0.020 |
(0.707) | (0.704) | (0.324) | (0.240) | (0.207) | |
Log Assets | 0.051 | 0.049 | 0.054 | 0.085 | 0.155 * |
(0.457) | (0.476) | (0.490) | (0.268) | (0.055) | |
Priority Sector Lending | 0.025 ** | 0.028 *** | 0.038 *** | 0.033 *** | 0.031 *** |
(0.014) | (0.007) | (0.002) | (0.004) | (0.006) | |
Year Effects | Yes | Yes | Yes | Yes | Yes |
No. of Obs. | 267 | 267 | 225 | 225 | 225 |
Adj. R2 | 0.51 | 0.51 | 0.56 | 0.58 | 0.59 |
Pr. > F | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 |
Dependent Variable | ||||
---|---|---|---|---|
Nnpa_ttladv | Gnpa_ttladv | Nnpa_additn_ttladv | Gnpa_additin_Ttladv | |
Intercept | −0.483 | −6.788 | 0.715 | 2.145 |
(0.730) | (0.013) | (0.571) | (0.242) | |
Boardsize | 0.015 | −0.008 | 0.015 | −0.007 |
(0.488) | (0.848) | (0.472) | (0.810) | |
Board Independence | 0.003 | 0.020 | −0.006 * | 0.001 |
(0.424) | (0.003) | (0.060) | (0.977) | |
Board Independence x Oprivate | 0.003 | 0.012 | 0.008 ** | 0.004 |
(0.472) | (0.162) | (0.043) | (0.485) | |
Board Independence x Nprivate | 0.001 | −0.001 | 0.001 | 0.007 |
(0.908) | (0.934) | (0.748) | (0.197) | |
Busy Director | 0.133 | 0.181 | 0.183 | 0.210 |
(0.314) | (0.483) | (0.127) | (0.228) | |
Director Attendance | 0.001 | −0.001 | 0.003 | 0.004 |
(0.898) | (0.817) | (0.200) | (0.212) | |
Ceo Duality | 0.126 | 0.650 | 0.173 | 0.165 |
(0.581) | (0.144) | (0.402) | (0.581) | |
Ceo Duality x Oprivate | 0.124 | −0.208 | −0.221 | −0.177 |
(0.692) | (0.733) | (0.436) | (0.667) | |
Ceo Duality x Nprivate | −0.718 * | −2.168 *** | −0.596 | −1.087 ** |
(0.076) | (0.006) | (0.104) | (0.041) | |
Nominee Director | 0.358 * | −0.217 | 0.470 ** | 0.815 *** |
(0.089) | (0.597) | (0.014) | (0.004) | |
Loans to Assets | 0.011 | −0.062 ** | −0.012 | 0.010 |
(0.485) | (0.048) | (0.402) | (0.624) | |
Log Assets | 0.064 | −0.437 *** | −0.017 | −0.087 |
(0.431) | (0.007) | (0.824) | (0.419) | |
Priority Sector Lending | 0.004 | 0.037 * | 0.005 | 0.003 |
(0.707) | (0.099) | (0.660) | (0.835) | |
Year Effects | Yes | Yes | Yes | Yes |
No. of Obs. | 225 | 225 | 225 | 225 |
Adj. R2 | 0.20 | 0.46 | 0.12 | 0.08 |
Pr. > F | 0.001 | 0.001 | 0.001 | 0.001 |
Ownership Group | No. of CEO Changes | Distribution of CEOs by Tenure (in Years) | ||||||
---|---|---|---|---|---|---|---|---|
1 | 2 | 3 | 4 | 5 | >5 | Average Tenure | ||
State-owned Banks | 93 | 28 | 20 | 21 | 13 | 5 | 6 | 2.65 |
(30.11) | (21.51) | (22.58) | (13.98) | (5.38) | (6.46) | |||
Old Private Banks | 40 | 14 | 6 | 9 | 4 | 1 | 6 | 2.90 |
(35.00) | (15.00) | (22.50) | (10.00) | (2.50) | (15.00) | |||
New Private Banks | 11 | 0 | 1 | 3 | 1 | 0 | 6 | 6.25 |
(0.00) | (9.09) | (27.27) | (9.09) | (0.00) | (54.55) | |||
Total | 144 | 32 | 27 | 33 | 18 | 6 | 18 | 2.99 |
(22.22) | (18.75) | (22.92) | (12.50) | (4.17) | (4.86) |
Performance Measures | Asset Quality Measures | ||||||||
---|---|---|---|---|---|---|---|---|---|
Roa | Mbvr | Nnpa_ | Gnpa_ | Nnpa_ | Gnpa_ | Nnpa_ | Gnpa_ | Npa_ | |
ttladv | ttladv | wrtoffs_ | wrtoffs_ | additn_ | additn_ | provsn_ | |||
ttladv | ttladv | ttladv | ttladv | ttladv | |||||
Intercept | −0.175 | −0.634 | 8.980 *** | 28.887 *** | 3.535 *** | 9.012 *** | 3.284 *** | 5.080 *** | 14.279 *** |
(0.576) | (0.210) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | |
Ceo Tenure | 0.050 *** | 0.205 *** | −0.137 *** | −0.273 *** | −0.102 *** | −0.102 *** | −0.086 *** | −0.077 *** | −0.069 |
(0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.003) | (0.154) | |
Trend | −0.008 | −0.011 | −0.187 *** | −0.631 *** | −0.131 *** | −0.141 *** | −0.031 * | −0.072 *** | −0.290 *** |
(0.369) | (0.475) | (0.001) | (0.001) | (0.001) | (0.001) | (0.054) | (0.001) | (0.001) | |
Loans to Assets | 0.001 | 0.004 | −0.083 *** | −0.328 *** | −0.080 *** | −0.074 *** | −0.033 *** | −0.040 ** | −0.170 *** |
(0.792) | (0.667) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.002) | (0.001) | |
Log Assets | 0.057 | 0.081 ** | −0.245 *** | −1.021 *** | −0.089 ** | −0.304 *** | −0.076 *** | −0.075 | −0.488 *** |
(0.007) | (0.018) | (0.001) | (0.001) | 0.065 | (0.001) | (0.037) | 0.122 | (0.001) | |
Priority Sector Lending | 0.010 ** | 0.010 | −0.062 *** | −0.149 *** | 0.009 | −0.046 *** | −0.007 ** | −0.035 *** | −0.085 *** |
(0.011) | (0.104) | (0.001) | (0.001) | 0.305 | (0.001) | (0.012) | (0.001) | (0.001) | |
Number of Observations | 438 | 438 | 438 | 438 | 438 | 438 | 438 | 438 | 438 |
Adj. R2 | 0.06 | 0.24 | 0.28 | 0.35 | 0.17 | 0.20 | 0.08 | 0.08 | 0.24 |
Pr. > F | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 |
Performance Measures | Asset Quality Measures | ||||||||
---|---|---|---|---|---|---|---|---|---|
Roa | Mbvr | Nnpa_ | Gnpa_ | Nnpa | Gnpa_ | Nnpa_ | Gnpa_ | Npa_ | |
Ttladv | ttladv | wrtoffs_ | wrtoffs_ | additn_ | additn_ | provsn_ | |||
ttladv | ttladv | ttladv | ttladv | ttladv | |||||
Intercept | −0.178 | −0.643 | 9.069 *** | 29.161 *** | 3.587 *** | 9.147 *** | 3.309 *** | 5.153 *** | 14.382 *** |
(0.569) | (0.230) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | |
Ceo Tenure—Year 2 | −0.056 | 0.116 | −0.394 ** | −1.039 ** | −0.118 | −0.380 * | −0.031 | −0.086 | −0.235 |
(0.436) | (0.344) | (0.034) | (0.046) | (0.480) | (0.055) | (0.804) | (0.605) | (0.449) | |
Ceo Tenure—Year 3 | −0.116 | 0.237 | −0.546 *** | −1.477 *** | −0.236 | −0.519 ** | −0.119 | −0.118 | −0.278 |
(0.142) | (0.080) | (0.008) | (0.010) | (0.197) | (0.017) | (0.386) | (0.519) | (0.416) | |
Ceo Tenure—Year 4 | 0.002 | 0.388 ** | −0.777 *** | −1.701 ** | −0.327 | −0.626 ** | −0.179 | −0.189 | −0.147 |
(0.980) | (0.020) | (0.002) | (0.017) | (0.147) | (0.020) | (0.290) | (0.400) | (0.727) | |
Ceo Tenure—Years ≥ 5 | 0.304 *** | 1.136 *** | −1.061 *** | −2.337 *** | −0.737 *** | −0.982 *** | −0.562 *** | −0.648 *** | −0.607 * |
(0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.081) | |
Trend | −0.008 | −0.006 | −0.187 *** | −0.627 *** | −0.131 *** | −0.137 *** | −0.031 * | −0.070 *** | −0.289 *** |
(0.393) | (0.726) | (0.001) | (0.001) | (0.001) | (0.001) | (0.052) | (0.001) | (0.001) | |
Loans to Assets | 0.001 | −0.004 | −0.078 *** | −0.317 *** | −0.077 *** | −0.071 *** | −0.030 *** | −0.039 *** | −0.169 *** |
(0.862) | (0.711) | (0.001) | (0.001) | (0.001) | (0.001) | (0.002) | (0.002) | (0.001) | |
Log Assets | 0.063 *** | 0.098 *** | −0.252 *** | −1.033 *** | −0.097 ** | −0.309 *** | −0.083 ** | −0.082 * | −0.493 *** |
(0.003) | (0.006) | (0.001) | (0.001) | (0.045) | (0.001) | (0.022) | (0.090) | (0.001) | |
Priority Sector Lending | 0.011 *** | 0.011 * | −0.061 *** | −0.146 *** | 0.008 | −0.045 *** | −0.017 *** | −0.036 *** | −0.085 *** |
(0.004) | (0.093) | (0.001) | (0.001) | (0.342) | (0.001) | (0.010) | (0.001) | (0.001) | |
Number of Observations | 438 | 438 | 438 | 438 | 438 | 438 | 438 | 438 | 438 |
Adj. R2 | 0.07 | 0.15 | 0.29 | 0.36 | 0.17 | 0.22 | 0.07 | 0.08 | 0.24 |
Pr. > F | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 |
Performance Measures | Asset Quality Measures | ||||||||
---|---|---|---|---|---|---|---|---|---|
Roa | Mbvr | Nnpa_ | Gnpa_ | Nnpa | Gnpa_ | Nnpa_ | Gnpa_ | Npa_ | |
ttladv | ttladv | wrtoffs_ | wrtoffs_ | additn_ | additn_ | provsn_ | |||
ttladv | ttladv | ttladv | ttladv | ttladv | |||||
Intercept | −0.930 ** | −0.729 | 9.909 *** | 32.940 *** | 3.732 *** | 10.647 *** | 3.937 *** | 6.540 *** | 17.198 |
(0.011) | (0.161) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | |
Ceo Tenure | −0.029 | −0.034 | −0.078 | 0.120 | −0.036 | −0.006 | 0.006 | 0.008 | 0.256 *** |
(0.211) | (0.307) | (0.197) | (0.476) | (0.500) | (0.931) | (0.876) | (0.878) | (0.010) | |
Ceo Tenure x Oprivate | 0.102 *** | 0.041 | −0.121 | −0.546 *** | −0.032 | −0.213 *** | −0.092 ** | −0.190 *** | −0.400 *** |
(0.001) | (0.260) | (0.069) | (0.004) | (0.586) | (0.003) | (0.039) | (0.001) | (0.001) | |
Ceo Tenure x Nprivate | 0.075 *** | 0.291 *** | −0.045 | −0.362 ** | −0.075 | −0.070 | −0.094 *** | −0.060 | −0.312 *** |
(0.001) | (0.001) | (0.409) | (0.019) | (0.125) | (0.232) | (0.010) | (0.212) | (0.001) | |
Trend | −0.018 * | 0.013 | −0.172 *** | −0.578 *** | −0.134 *** | −0.112 *** | −0.026 | −0.046 ** | −0.256 *** |
(0.070) | (0.371) | (0.001) | (0.001) | (0.001) | (0.001) | (0.132) | (0.042) | (0.001) | |
Loans to Assets | 0.005 | 0.024 *** | −0.090 *** | −0.362 *** | −0.088 *** | −0.079 *** | −0.040 *** | −0.043 *** | −0.721 *** |
(0.343) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | |
Log Assets | 0.118 *** | 0.072 * | −0.322 *** | −1.350 *** | −0.102 | −0.441 *** | −0.127 *** | −0.197 *** | −0.194 *** |
(0.001) | (0.053) | (0.001) | (0.001) | (0.094) | (0.001) | (0.005) | (0.001) | (0.001) | |
Priority Sector Lending | 0.013 *** | 0.021 *** | −0.064 *** | −0.166 *** | 0.006 | −0.050 *** | −0.021 *** | −0.038 *** | −0.099 *** |
(0.001) | (0.001) | (0.001) | (0.001) | (0.508) | (0.001) | (0.002) | (0.001) | (0.001) | |
Number of Observations | 438 | 438 | 438 | 438 | 438 | 438 | 438 | 438 | 438 |
Adj. R2 | 0.10 | 0.42 | 0.29 | 0.36 | 0.18 | 0.22 | 0.09 | 0.10 | 0.26 |
Pr. > F | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) | (0.001) |
© 2018 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).
Share and Cite
Sarkar, J.; Sarkar, S. Bank Ownership, Board Characteristics and Performance: Evidence from Commercial Banks in India. Int. J. Financial Stud. 2018, 6, 17. https://doi.org/10.3390/ijfs6010017
Sarkar J, Sarkar S. Bank Ownership, Board Characteristics and Performance: Evidence from Commercial Banks in India. International Journal of Financial Studies. 2018; 6(1):17. https://doi.org/10.3390/ijfs6010017
Chicago/Turabian StyleSarkar, Jayati, and Subrata Sarkar. 2018. "Bank Ownership, Board Characteristics and Performance: Evidence from Commercial Banks in India" International Journal of Financial Studies 6, no. 1: 17. https://doi.org/10.3390/ijfs6010017