Impact of board structure on the performance of rural and community banks in the emerging economy context

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Abstract

The paper sought to examine the extent to which board structure impacts on the performance of rural and community banks (RCBs) in emerging economies, using the Brong Ahafo Region in Ghana as a case study. A panel data comprising the financial reports from 2010 to 2016 of eleven (11) RCBs were used for the study. The fixed effect modelling was used to examine the extent to which board structure impacts on the performance of the RCBs. Our results show that previous year’s returns on assets and equity as well as the board size and female composition had positive and significant relationships with returns on assets and equity respectively while board diversity had a significant and negative impact on return on equity. The implication for this study is that there is the need to control board size, while board diversification that considers female representations as part of its composition would go a long way to enhancing a firm’s performance. It is recommended that further studies be carried out to determine corporate board structure and its impact on management compensation in the rural and community banks in emerging economies.

Keywords: Board Structure, Return on Assets, Return on Equity, Corporate Governance, Ghana

JEL Classification: G21, G28, G32, L25

Received: 01.12.2018
Accepted: 06.02.2019
Published online: 19.02.2019

How to cite this paper: Sackey, F. G., Yeboah, P. K., & Owusu, J. D. A. (2019). Impact of board structure on the performance of rural and community banks in the emerging economy context. Corporate Board: Role, Duties and Composition, 15(1), 33-42. https://doi.org/10.22495/cbv15i1art4