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Strong Boards, Risk Committee and Bank Performance: Evidence from India and China

In: Corporate Governance in Emerging Markets

Author

Listed:
  • Francesca Battaglia

    (University of Naples Parthenope)

  • Angela Gallo

    (University of Salerno)

  • Anna Elvira Graziano

    (University of Rome, “Tor Vergata”)

Abstract

The recent financial crisis has raised several questions with respect to the corporate governance of financial institutions. This paper investigates whether boards of directors and risk management-related corporate governance mechanisms are associated with a better bank performance during the financial crisis of 2007/2008 for a sample of Chinese and Indian listed banks. We measure market bank performance by Tobin’ Q and price-earnings ratio. In line with the previous literature on US banks, we find the general irrelevance of the standard board’s variables when specific variables related to the risk committee are included in the analysis. We find that the market valuation and the expected market growth (Tobin’ Q and P/E) are larger for banks with smaller risk committee. In particular, we find that the market valuation is negatively associated with the size of the risk committee and positively associated with the number of the risk committee’ meetings. This seems to suggest that the market discounts as favorable the information related to “strong” risk governance.

Suggested Citation

  • Francesca Battaglia & Angela Gallo & Anna Elvira Graziano, 2014. "Strong Boards, Risk Committee and Bank Performance: Evidence from India and China," CSR, Sustainability, Ethics & Governance, in: Sabri Boubaker & Duc Khuong Nguyen (ed.), Corporate Governance in Emerging Markets, edition 127, pages 79-105, Springer.
    • Handle: RePEc:spr:csrchp:978-3-642-44955-0_4
    DOI: 10.1007/978-3-642-44955-0_4
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    Citations

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    Cited by:

    1. Galletta, Simona & Mazzù, Sebastiano & Scannella, Enzo, 2021. "Risk committee complexity and liquidity risk in the European banking industry," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 691-703.
    2. Mavrakana, Christina & Psillaki, Maria, 2019. "Do board structure and compensation matter for bank stability and bank performance? Evidence from European banks," MPRA Paper 95776, University Library of Munich, Germany.
    3. Simona Galletta & Sebastiano Mazzù, 2019. "Liquidity Risk Drivers and Bank Business Models," Risks, MDPI, vol. 7(3), pages 1-18, August.

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