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The effect of board size and composition on bank efficiency

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  • Agoraki, Maria-Eleni
  • Delis, Manthos D
  • Staikouras, Panagiotis

Abstract

This paper analyzes the relationship between board structure, in terms of board size and composition, and bank performance. Unlike previous studies, the present analysis is carried out within a stochastic frontier framework. To this end, bank performance is proxied by both cost and profit efficiency, measures that present considerable advantages over simple accounting ratios. The empirical framework formed is applied to a panel of large European banks operating during the period 2002-2006. We find that board size negatively affects banks’ cost and profit efficiency, while the impact of board composition on profit efficiency is non-linear. Finally, introducing risk-taking (credit risk) as an interaction component of board size and composition does not affect the robustness of the results.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18548.

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Date of creation: 08 Oct 2009
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Handle: RePEc:pra:mprapa:18548

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Keywords: Corporate governance; Board size and composition; Bank cost and profit efficiency; Stochastic frontier analysis;

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  1. Cristian Barra & Sergio Destefanis & Giuseppe Lubrano Lavadera, 2013. "Regulation and the Crisis: The Efficiency of Italian Cooperative Banks," CSEF Working Papers 338, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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