Evaluating Corporate Performance and Bank Productivity in China: The Moderating Role of Independent Directors

Israr Khan,Mansi Wang

doi:10.3390/su13063193

Abstract

Corporate governance (CG) is not an abstract goal. It exists to serve the bank’s purpose by giving a framework through which investors, directors, and the top management can efficiently follow its objectives. Subsequently, it boosts the financial performance of the bank for its shareholders. This paper explores CG and its impacts on financial performance from the evidence collected from selected commercial banks (CB) in China. The data sample for this research comprises selected CBs in China for the period from 2008 to 2019. Applying selection standards provides us a data sample of 17 CBs. We employed the generalized method of moments (GMM) regression model constructed on 170 observations to identify the variables’ relationship. Our findings show that female independent directors positively and significantly affect bank financial performance. Despite the literature review, we found that the existence of female directors alone does not positively and significantly improve banks’ financial performance. The finding suggests that female directors are more efficient when they are selected as independent directors. The findings show that CEO duality affects bank financial performance positively and significantly. CEO duality strengthens the financial performance of CBs because of the solidarity of the order it presents. The results also show that CEO shareholding and financial performance of Chinese CBs have a positively significant bond with each other. This result suggests that a blend of CG instruments is more impressive than one CG component. The investigation results added a new dimension to the governance literature that could be an important source of knowledge for policymakers and regulators to improve the current governance structure for better performance across countries. This paper support principal-agent theory and the author also provide some help for the theories that regulators should support gender quotas in the board of directors of banks to decrease risk-taking behavior.

Highlights

Board gender diversity has become a significant variable in corporate governance (CG)in the changing economy
The fourth contribution is that we examine a unique, coordinated, and multidisciplinary assessment approach of the ownership structure in Chinese commercial banks (CB), which was invited for an extensive amendment of the principle of CG and included various perspectives and information
Concerning the generalized method of moments (GMM) model analyzing the impact of gender diversity—for example, female representation in the bank board and the upper management—on ensuing performance, findings exhibit that gender diversity is significant and positively correlated with a bank’s efficiency

Summary

Introduction

Board gender diversity has become a significant variable in corporate governance (CG). In the UK, gender diversity was brought up for the first-time in the amended CG code of 2012. This amendment was brought after considering different suggestions from Potter and Ramly [1,2]. CEO attributes like gender, education, and age significantly impact decision-making and organization performance [3]. The appointment of female executives is compulsory. The Norwegian and Spanish governments forced an obligatory quota for each scheduled bank to have at least

Methods

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Discussion

Conclusion