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

Israr H. Khan · Mansi Wang

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Corporate Finance and Governance Gender Diversity and Inequality Corporate Governance and Financial Management

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.

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References

2009How to do Xtabond2: An Introduction to Difference and System GMM in Stata 2003Corporate Governance, Board Diversity, and Firm Value 1991Managing cultural diversity: implications for organizational competitiveness 2001Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature 2010The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey 2007Gender Diversity in the Boardroom and Firm Financial Performance 2002Culture, Corporate Governance and Disclosure in Malaysian Corporations 2014Gender diversity, board independence, environmental committee and greenhouse gas disclosure

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