Audit committee nominee directors and bank performance: Evidence from Indian banks

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Abstract

The audit committee (AC) in the Indian public sector banks consists of executive directors, Reserve Bank of India nominee directors, and the central government nominee directors in addition to independent directors, whereas the AC in the private sector banks consists mostly of independent directors. The difference in the constitution of the AC across different ownership may have a different impact on their performance. Hence, this study aims to investigate the impact of the nominee directors on the audit committee and the performance of the Indian listed banks. The study uses the panel data approach. We have taken 21 public sector banks and 15 private sector banks operating in the Indian banking sector. The fixed effects estimation technique to examine the relationship between the audit committee constituents and bank performance during the period 2009–2010 to 2016–2017 was used. It was found that CEO chairman duality, the presence of the chartered accountant (CA) director, AC chairman, and AC bear a positive relationship with bank performance. The findings are more or less consistent across the various bank performance measures and sub-samples classified based on the bank size, audit committee size, and ownership of the banks. The study explores the relationship between nominee directors and bank performance. The study provides insights to policy regulators and policymakers who are entrusted with the establishment of ACs in the banks in light of ongoing regulatory reforms.

Keywords: Audit Committee, AC Chairman, Bank Performance, CA Director, CEO Duality

Authors’ individual contribution: Conceptualization — N.G., N.A., R.D., J.K., B.J., and P.B.; Methodology — N.G. and N.A.; Validation — N.G., N.A., R.D., J.K., B.J., and P.B.; Formal Analysis — N.G., N.A., R.D., B.J., and J.K.; Investigation — N.G., N.A., R.D., J.K., B.J., and P.B.; Resources — N.G., J.K., B.J., and P.B.; Data Curation — N.G., N.A., and R.D.; Writing — Original Draft — N.G., N.A., R.D., J.K., B.J., and P.B.; Writing — Review & Editing — N.G., N.A., R.D., J.K., B.J., and P.B.; Supervision — N.G., N.A., and R.D.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: C33, E58, G18, G21, M42

Received: 08.07.2023
Accepted: 02.10.2023
Published online: 04.10.2023

How to cite this paper: Gupta, N., Ansari, N., Dammalapati, R., Kotecha, J., Jagwani, B., & Bakhshi, P. (2023). Audit committee nominee directors and bank performance: Evidence from Indian banks. Corporate Ownership & Control, 20(4), 8–31. https://doi.org/10.22495/cocv20i4art1