Does the Board Size Really Matter? An Empirical Investigation on the Indian Banking Sector

Mayur, Manas; Saravanan, Palanisamy

doi:10.2139/ssrn.898763

Cited by 12 publications

(11 citation statements)

References 33 publications

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“…In contrast to previous work, Mayur and Saravanan (2006) noted that the size of the board has no effect on the performance of banks.…”

Section: Literature and Research Hypothesescontrasting

confidence: 94%

Governance and Human Capital in Italian Co-operative and Popular Banks: Managing the Complexity

Bussoli¹,

Giannotti²

2015

CUBR

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This paper aims to investigate the existence of a statistically significant relationship between performance and loan quality variables and the number of employees, the size of the board, and the number of committees in Italian cooperative and popular banks, in the years from 2010 to 2012. The analysis method is based on multivariate panel regressions models. The main results of the paper are related to the existence of a positive relationship between the loan quality and the number of committees and of employees: As the number of employees (proxy of the size and complexity of the structure) and committees (proxy for the complexity of the board) grows, the loan quality worsens. The number of committees also shows a negative relationship with return on average equity. The main results of the paper suggest to manage and reduce the complexity of the governance structure of cooperative and popular banks.

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“…In contrast to previous work, Mayur and Saravanan (2006) noted that the size of the board has no effect on the performance of banks.…”

Section: Literature and Research Hypothesescontrasting

confidence: 94%

Governance and Human Capital in Italian Co-operative and Popular Banks: Managing the Complexity

Bussoli¹,

Giannotti²

2015

CUBR

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“…More precisely, Mayur and Saravanan (2006) analyzed the impact of corporate governance on banks performance, measured by Tobin's Q and by the market to book ratio.…”

Section: The Impact Of Corporate Governance On Banks Performancementioning

confidence: 99%

“…Literature has focused on the relationship between corporate governance and performance in the financial and non-financial companies (Yermack, 1996;Eisenberg, 1998;Carretta, 2011;Vafeas, 1999;Hermalin & Weisbach, 2003) and on the impact of corporate governance on banks performance (Adams & Mehran, 2003;Fields & Keys, 2003;Belkhir, 2009;Adams & Ferreira, 2009;Mayur & Saravanan, 2006).…”

Section: Introductionmentioning

confidence: 99%

The Impact of Corporate Governance on Banks Performance and Loan Quality: Evidence From Italian Cooperative Banks

Bussoli¹,

Gigante²,

Tritto³

2015

CBR

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In the banking system, a context characterized by growing instability and by the speed of evolution of business dynamics, the system of corporate governance plays a key role, both for large banks and for banks with a smaller size. The paper aims to investigate the influence of corporate governance of the banks that operate in the cooperative credit system on performance and quality of loans, over the years 2010-2011-2012. In order to achieve this aim, the following research hypotheses have been formulated: There is a statistically significant relationship between the size and the structure of the board and banks performance operating in the cooperative credit system; there is a statistically significant relationship between the size and structure of the board and the credit quality of banks operating in the cooperative credit system. The analysis is conducted on a sample composed of 48 Italian banks, divided into 24 cooperative banks and 24 popular banks. The sample is made up of banks from all over Italy and very different in terms of dimension. For the sample construction, data relative to governance of banks were collected from the balance sheets in the period from June to August 2014. Financial-economic data were collected from the Financial Statements and from Bankscope database. The methodology of analysis is based on multivariate OLS (ordinary least squares) regression models. The main results refer to the presence of significant relationships between board dimension and the quality of loans and among the number of committees and performance and the quality of loans. The presence of a significant and negative relationship between the board dimension and the ratio of impaired loans to gross loans indicates the possibility that enlargement of board dimension allows a better quality of loans. The presence of a positive relationship between the number of committees and the ratio of impaired loans to gross loans signals the possibility that a greater number of committees can produce a worse quality of loans. The presence of a negative relationship between the number of committees and bank performance suggests to limit and manage the complexity of governance in banks operating in the cooperative credit system.

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“…So in this study, Tobin's Q has been used. This measure has been used by many researchers in their study {Sarkar and Sarkar (2000), Jian Chen (2001), Bhagat and Black (2002), Mayur and Saravanan (2005), Haniffa and Hudaib (2006)}.…”

Section: Variable Description and Its Measurement Dependent Variablesmentioning

confidence: 99%

“…Tobin's Q: is defined as the ratio of market value of equity and market value of debt to replacement cost of assets (Mayur and Saravanan, 2005). As used by previous researchers here, Proxy for Tobin's Q has been used.…”

Section: Variable Description and Its Measurement Dependent Variablesmentioning

confidence: 99%

Corporate Governance Structure and Performance of Indian Companies

Chauhan

Pasricha

2010

Indian Journal of Corporate Governance

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This study investigates the relationship between corporate governance structure and performance of Indian companies. The main objective of this study is to examine the impact of selected board characteristics and ownership structure on the firm performance. This analysis ranges over a period of six years, from 2001-02 to 2006-07 and is based on Pharmaceutical and IT industry. Least square dummy variable regression model has been used to study the relationship. We find that while board size, listing status of firm and foreign shareholding has positive and significant relationship with firm performance, public shareholding has negative and significant impact. However, independent director proportion, participation rate of independent directors and separation of Chairman and CEO post does not have a significant relationship with firm performance.Empirical studies conducted to study the relationship between board attributes, ownership structure and firm performance has shown mixed results. Board Size and Firm PerformanceStudies conducted by researchers show that size of the board does matter. Lipton and Lorsch (1992) and Jensen (1993) suggested that large boards can be less effective than smaller boards. The view put forward by previous researchers is that with increase in board size, agency problems too increase and the board becomes more symbolic and lesser part of the management process. Study conducted by Yermack (1996) to investigate the relationship between board size and firm performance based on 452 US firms for the period 1984 to 1991 revealed inverse association between board size and firm value. Haniffa and Hudaib (2006) in their study based on market based measures suggested that a large board was less effective in monitoring firm performance and companies with bigger boards had to bear heavy compensation cost, however, results based on accounting return suggested that large boards provided diversity in contracts, experience and expertise which led to better performance. Garg (2007) observed that poor performance led to increase in board size, which in turn hampered performance. He concluded that smaller boards were more efficient as compared to larger boards and ideal board size should be six. Similar results were found by Guest (2009) who also examined the impact of board size on firm performance for a large sample of 2746 listed firms in UK over 1981-2002. He found that board size had a negative relationship with firm profitability. He put forth the view that problems of poor communication and decision-making reduced effectiveness of large board. While above researchers found inverse relationship between board size and firm performance, some also predicted positive relationship. Pearce & Zahra (1992) and Dalton et al. (1999) predicted positive relationship between board size and firm performance. Kathuria and Dash (1999) conducted a study to examine the relationship between board size and firm performance based on 504 Indian firms from 18 industries. Findings of the study revealed that the performance ...

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Does the Board Size Really Matter? An Empirical Investigation on the Indian Banking Sector

Cited by 12 publications

References 33 publications

Governance and Human Capital in Italian Co-operative and Popular Banks: Managing the Complexity

Governance and Human Capital in Italian Co-operative and Popular Banks: Managing the Complexity

The Impact of Corporate Governance on Banks Performance and Loan Quality: Evidence From Italian Cooperative Banks

Corporate Governance Structure and Performance of Indian Companies

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