Corporate governance indicators as determinants of bank efficiency: the case of the UK listed banks

Abstract

This paper investigates the impact of a variety of corporate governance mechanisms on the performance of banks listed on the London Stock Exchange (LSE), by utilising data collected for 52 banking institutions for the period 2012 to 2017. Exhaustive results derived from multi-model applications document the superiority of GMM models to examine these relationships. Based on robust empirical findings, we support that increasing board size, especially the number of non-executive directors, and the frequency of board meetings up to a certain point could prove to be beneficial for the listed banks on the LSE. Moreover, our findings imply that simply complying with the Governance Code including independent board members or following the trend of gender diversity without proper evaluation of executives’ skills could damage bank efficiency. Finally, this study fails to discern significant links between the number of foreign directors and CEO-Chairman duality with the performance of UK banks.