Abstract
This paper is the first research attempt that investigates the impact of a large number of corporate governance mechanisms on the performance of Greek banks,employing widely accepted in the literature of corporate governance econometric models. Results indicate that system GMM models are more suitable methodological tools than pooledOLS and fixed effects models to address well-known econometric problems, such as endogeneity, simultaneity and unobserved heterogeneity of individual banks. The findings, as derived from the application of GMM models, imply that increasing the board size and the number of independent directors can both have positive impact on the performance of Greek banks, but only up to a certain point. Thus, bank efficiency will increase as board size and the proportion of independent directors grow up to a point where these relationships hit a maximum from which bank performance decreases. Our multi-model estimations failed to trace any significant contribution of the number of female and foreign directors on the performance of Greek banks. Finally, the dual appointment of a CEO as Chairman appears to affect negatively two out of four proxies of bank performance. Overall, the results provide support for the positive impact of corporate governance mechanisms on the performance of Greek banks. The significance of these findings increases, considering that the period under study (2008-2014) is marked by high market volatility and uncertainty due to the well-known debt crisis that plagues Greece since the beginning of 2008.
Highlights
The recent global financial crisis motivated a large number of researchers to assess the impact and usefulness of corporate governance mechanisms on the performance of banking institutions
Our empirical models and findings extend the above papers in a number of interesting and innovative ways. This is the only study that narrows its research interest on assessing the impact of corporate governance mechanisms on bank performance for the case of Greece and for a period ranging from the beginning of the severe sovereign debt crisis in 2008 until 2014. Considering that this crisis continues to plague the Greek economy until present, this paper offers a unique opportunity to answer the question whether significant relationships between corporate governance mechanisms and bank performance can be traced for a national economy that is characterized by high market volatility and financial instability
The governance literature specialized in the banking industry experiences significant growth in the recent years
Summary
The recent global financial crisis motivated a large number of researchers to assess the impact and usefulness of corporate governance mechanisms on the performance of banking institutions. Our empirical models and findings extend the above papers in a number of interesting and innovative ways This is the only study that narrows its research interest on assessing the impact of corporate governance mechanisms on bank performance for the case of Greece and for a period ranging from the beginning of the severe sovereign debt crisis in 2008 until 2014. Previous studies focused on corporate governance issues for the case of Greece (Grose et al, 2014) limit their analysis on a theoretical presentation of the Greek CG regulatory framework, they analyze the implementation of the CG system and present their conclusions on the compliance of listed companies in the Athens Stock Exchange (ASE) with the relevant Greek CG legal framework These studies lack empirical analysis, they do not concentrate on the banking sector and do not provide exhaustive results to document the impact of CG mechanisms on bank efficiency. Our paper aims to enrich the very limited governance literature for the case of Greece by producing for first time, to the best of our knowledge, the most complete set of empirical data used to assess the corporate governance bank performance nexus for the Greek banking sector
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