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Do board structure and ownership structure affect bank's performance? : a study of Asian economies

English Abstract

This paper studies the impact of board effectiveness and ownership structure on banks’ performance in the sample of listed banks in five Asian regions such as China, Hong Kong, Taiwan, Singapore and Malaysia during the period of 2001 to 2011. We employ panel data to examine these relationships and also address the endogeneity problem using two-stage-least-squares (2SLS) method. Traditional estimation methods such as pooled ordinary least square estimation (pooled OLS), fixed effects models and random effects model are also implemented as comparison. Using Tobin’s Q as a key measure of bank performance, we find a nonlinear and inverted U-shape relationship between board size and performance in all estimation methods. This suggests that board with larger but not excessive number of directors might monitor and advise managers more effectively, and thereby create more value to banks. We also find a significant positive relationship between proportion of outside directors and performance in OLS, fixed time and random time effect estimation. However, the coefficient changes sign in the 2SLS regressions and become insignificant. This indicates that more outside directors might not bring better performance to banks. Further, our findings show no evidence to support the CEO duality, frequency of board meeting and ownership structure of largest shareholder and blockholders result in variations in bank performance. Moreover, we find a significant positive relationship between capital and performance, which suggests that banks with higher capital can improve their performance.

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Leong, Chi Kong


Faculty of Business Administration




Banks and banking -- Asia

Bank management -- Asia


Vong, Pou Iu

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