Does board effectiveness matter for bank performance Evidence from India

Bhatia, Madhur; Gulati, Rachita

doi:10.1504/ijcm.2020.10028754

Cited by 1 publication

(2 citation statements)

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“…H4a: PSBs with more busy directors declare higher dividend payouts Though much of the contemporary literature on female directors examine their influence on the performance of banks (see, for instance, Adams & Ferreira, 2009;Bhatia & Gulati, 2020a;Dong et al, 2017;Gulamhussen & Santa, 2015;Pathan & Faff, 2013), but it also suggests that female directors are better monitors compared to their counterparts (Adams & Ferreira, 2009). They are observed to enhance the quality of discussions and, thus, considerably affect corporate decisions (Gul et al, 2011;Miller & Triana,).…”

Section: Board Attributes and Dividend Payoutsmentioning

confidence: 99%

“…As far as we know, no study comprehensively examines this relationship between dividends and board quality. Although few researchers have attempted to analyse the link between the board and profitability (Bhatia & Gulati, 2020a, 2020b; Sarkar & Sarkar, 2018), risk‐taking (Agarwal et al, 2015), and bank stability (Gulati, 2021), the literature exhibits an apparent shortage of studies that explicitly assess the role of boards in determining dividend payouts in India. Second, the study investigates the board's role in influencing both propensity and intensity of dividend payouts.…”

Section: Introductionmentioning

confidence: 99%

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Are boards ‘substitute’ or ‘complement’ dividend payout? Econometric evidence for Indian banks

Bhatia

Gulati

2022

Economic Notes

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This study econometrically tests the ‘substitution’ versus ‘outcome’ hypotheses by examining the impact of board governance on the dividend payout policy in the Indian banking industry. The analysis is confined to the period from 2005 to 2018. The results reveal a significant positive influence of overall board quality on the magnitude of payouts, supporting the ‘outcome hypothesis’. At the disaggregated level, independent directors, female directors, chief executive officer duality, and board meetings significantly influence the dividend policy of Indian banks. Our further investigation of the board‐dividend nexus at the ownership level shows that this complement relation is only visible in private banks (PBs). While the ‘substitution hypothesis’ holds in public sector banks (PSBs). The results suggest that good governed PBs use dividends as a complementary measure of monitoring mechanism. In contrast, governed boards of PSBs take conservative financial decisions and declare a low dividend. The findings are robust at disaggregate level, corroborating our main findings and additional analyses, including propensity score matching depicting that our conclusions are not beset by endogeneity or selection bias.

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