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Do valued independent directors matter to commercial bank performance?

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  • Tam, On Kit
  • Liang, Hsin-Yu
  • Chen, Sheng-Hung
  • Liu, Bin

Abstract

This study investigates whether independent directors who are valued by their firms enhance firm performance. We develop improved metrics to build on the new notion of board hierarchy to explore this question with evidence from China’s commercial banks. Our results show strong support for our proposition that independent directors, as reflected by their board hierarchy ranking, do matter in their effectiveness as directors and in bank performance. We also find discernible differences in board hierarchy patterns and performance outcomes between the newly emerged and more numerous city commercial banks and the group of large and predominantly state-owned banks.

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  • Tam, On Kit & Liang, Hsin-Yu & Chen, Sheng-Hung & Liu, Bin, 2021. "Do valued independent directors matter to commercial bank performance?," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 1-20.
    • Handle: RePEc:eee:reveco:v:71:y:2021:i:c:p:1-20
    DOI: 10.1016/j.iref.2020.06.005
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    1. S. M. Shamsul Alam & Mohammad Abdul Matin Chowdhury & Dzuljastri Bin Abdul Razak, 2021. "Research evolution in banking performance: a bibliometric analysis," Future Business Journal, Springer, vol. 7(1), pages 1-19, December.

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    More about this item

    Keywords

    Independent directors; Board hierarchy; Bank performance; Director characteristics; China;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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