Supervisory boards, financial crisis and bank performance: do board characteristics matter?

Abstract

Failures in governance, especially in regard to boards of directors, have been blamed for the [2007][2008] financial crisis. The increased public scrutiny regarding the actions and role of the board of directors in banks, following the crisis, inspires to examine whether and to what extent the characteristics of banks' boards influence their performance in the crisis. Using a sample of 72 publicly listed European banks, we find that banks with more independent and busy boards experienced worse stock returns during the crisis.Conversely, the better performing banks had more banking experts serving as supervisory directors.Additionally, we find that gender and age diversity improved banks' performance during the crisis; hence, diversity matters. We also construct a governance quality index on the basis of board characteristics and conclude that governance quality positively affects banks' returns during the crisis. Overall, we find evidence that banks' performance during the financial crisis is a function of their boards' characteristics.

Testing the governance-performance relationship for the Tunisian banks: a GMM in system analysis

“…This change has now been extended to all banks under "Art 47" of the new banking law. Other authors found results similar to ours (Pathan and Faff 2013;Fernandes et al 2016;Ataur and Jahurul 2018).…”

“…They suggested that an optimal combination of independent and non-independent directors would be more effective in securing bank value than excessively independent advice. In a recent study by Fernandes et al (2016) on the performance of banks during the financial crises of 2007-2008, their results revealed that the most successful banks during the crisis had big independent boards. Based on the literature regarding the impact of board independence on the efficiency of banking activity, we make the following assumption: H 3 : A high percentage of independent directors on the board of directors is linked to higher performance.…”

“…Therefore, new measures were taken to strengthen the internal governance of banks, which are considered a key factor in explaining banking performance. The latter has been the subject of several research studies, yet there continues to be a lack of unanimity regarding its determinants (Adams and Mehran 2008;Laeven and Levine 2009;Belkhir 2009a,b;Pathan 2009; Lee Siew and Mansor 2015;Caspar 2016;Chenini and Jarboui 2016;Ruhul et al 2016;Fernandes et al 2016;Basuonya et al 2017;Hung et al 2017;Manas and Saravanan 2017;Ataur and Jahurul 2018;Chen et al 2018, Haris et al 2019.…”

Quality of Board Members’ Training and Bank Financial Performance: Evidence from Portugal

“…This study used a sample of CEOs from publicly-listed US banks during the period from 1992 to 2011. Another study from Fernandes et al (2017b) emphasized that directors' qualifications may affect banks' performance, and if the level of directors' qualifications are higher, they will be capable of making better corporate decisions. The previous aspect is more relevant for banks in which the complexity of their activity is higher than others.…”

Moderating Effect of Corporate Governance Between Recapitalization and Bank’s Performance: Proposed Framework

“…The global financial crisis (GFC) of the last decade has been described as the most severe crisis since the Great Depression of 1940 (Fernandes, Farinha, Martins, & Mateus, 2016). However, different countries had various experiences and method for approaching their banking recapitalization and how they affect banks performance.…”