BOARD OF DIRECTORS STRUCTURE AND BANK�S PERFORMANCE: EVIDENCE FROM BANGLADESH

Abstract

ABSTRACT The purpose of the study is to explore impact of the characteristics of board of directors (BoD) structure on banking performance indicators of banking sector in Bangladesh. The sample size of the study consists of 31 banks in Bangladesh with complete profile of total 294 directors of the banks. Return on assets (ROA), return on equity (ROE), non-performing loan (NPL) and capital adequacy ratio (CAR) of the 31 banks have been selected as measures of banking performance. Besides, BoD structure of world’s top 5 biggest banks which have reached into these positions due to their better performance have been taken into consideration to depict the international best practices analyzing the complete profile of 66 board members of the banks for making comparison. The research uses three categories of characteristics of BoD structure namely board composition, educational qualification, and professional experience. Total 13 characteristics of BoD have been considered under these 3 categories. Regressions have been performed separately for ROA, ROE, NPL and CAR. The research paper provides empirical evidence that size of board of directors matters in explaining ROA. Besides, existence of civil service holders as member of BoD matters in explaining ROE, NPL and CAR. The study will support policy makers to develop and execute proper amendments toward the transition into good corporate governance and better banking performance. Literatures have been rarely found that focus on the impact of board of directors structure on bank’s performance in Bangladesh. Hence, this study seems first to address such issue in the context of a developing country as Bangladesh covering 13 characteristics of BoD. Keywords Corporate governance; Board of directors; ROA, ROE, NPL, CAR.