Abstract
This study looks into the relationships between the banks? ownership structures, the characteristics of their boards, and their performance. A bank?s performance varies depending on a series of different factors. In recent years, the evaluation of performance in the context of corporate governance practices has gained importance. This study considers the issue from the perspective of developed nations, looking at the examples of the United States and the United Kingdom. The findings demonstrate that adopting certain corporate governance practices improves a bank?s performance levels over previous periods. Having a duality in the board structure and increasing its proportion of nonexecutive board members improve a bank?s performance. In contrast, a statistically significant negative relationship was found between bank performance and board size, board members appointed for their specific skills, and the number of board meetings. It was also discovered that there is no linear relationship between the proportion of strictly independent board members on a board of directors and performance. A nonlinear relationship was found between bank ownership concentration and their performance. The discovery of a nonlinear relationship between performance and increasing concentration in a bank?s ownership structure and the proportion of strictly independent board members on its board is a sign that there is an optimal level for these variables.
Highlights
The fundamental processes carried out at banks, whether they concern operations or management, are disclosed under stringent rules laid out in legislation and regulation
These findings show that bank performance declined when the proportion of board members with skills in specialized areas increased, supporting the negative relationship that emerged between the proportion of completely independent board members
Corporate governance practices are important to firms to reduce agency costs and carry out more effective management policies
Summary
The fundamental processes carried out at banks, whether they concern operations or management, are disclosed under stringent rules laid out in legislation and regulation. Data and Sample Selection This study analyzed the relationship between the attributes of the board of directors, ownership structure, and performance of banks traded in the stock markets in the United States and the United Kingdom. Data belonging to these banks from 2002 to 2014 were obtained via Datastream from the Worldscope database. Members of a board of directors having specific knowledge increase the possibility of decisions being made by experts This is expected to have a positive effect on bank performance.
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