The effect of management factors of board characteristics and banks’ specific on banks’ performance: Empirical evidence from the emerging economy

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Abstract

The study aims to examine the impact of management factors of board characteristics and banks’ specific on the financial performance of Indian listed banks. To achieve the study objectives, data are extracted from 38 listed banks from the ProwessIQ database that covers the period from 2010 to 2019. Fixed and random effect models are used for analyzing the data. Further, a two-stage least square (2SLS) analysis is employed for treating the endogeneity problem. The main findings revealed that size, deposits and advances, and current ratio negatively and significantly impact the financial performance of the banks. On the contrary, market capitalization and age positively and significantly impact the financial performance of Indian listed banks. Furthermore, results showed that the board’s diligence and independence positively and significantly affected the financial performance. The study contributes to the existing body of knowledge by focusing on the important sector with is banking sector in developing countries. The banking sector in India represents a major component of the financial system with more than 70 percent of total assets in the financial sector that requires special attention to corporate governance in theoretical and empirical fields.

Keywords: Management Factors, Board, Size, Independence, Diligence, Bank, Performance

Authors’ individual contributions: Conceptualization — F.A.B.; Methodology — N.H.S.F.; Software — N.H.S.F.; Validation — F.A.B.; Formal Analysis — F.A.B. and N.H.S.F.; Investigation — F.A.B.; Data Curation — N.H.S.F.; Writing — F.A.B.; Visualization — F.A.B.; Supervision — F.A.B.; Project Administration — F.A.B.; Funding Acquisition — F.A.B. and N.H.S.F.

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

JEL Classification: M1, M12, M4

Received: 02.01.2024
Accepted: 14.10.2024
Published online: 17.10.2024

How to cite this paper: Belhaj, F. A., & Farhan, N. H. S. (2024). The effect of management factors of board characteristics and banks’ specific on banks’ performance: Empirical evidence from the emerging economy. Corporate Board: Role, Duties and Composition, 20(3), 30–42. https://doi.org/10.22495/cbv20i3art3