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Board independence and Chinese banking efficiency: a moderating role of ownership restructuring

Author

Listed:
  • Ramiz ur Rehman

    (Xián Polytechnic University)

  • Junrui Zhang

    (Xián Jiaotong University)

  • Muhammad Akram Naseem

    (University of Lahore)

  • Muhammad Ishfaq Ahmed

    (University of Lahore)

  • Rizwan Ali

    (University of Lahore)

Abstract

This study investigates how Chinese banking sector reforms have affected the relationship between banking performance and bank board structure. The study analyzes data from listed commercial Chinese banks between 2000 and 2013, and banking efficiency scores are estimated using the stochastic frontier approach (SFA) and data envelopment analysis (DEA). The impact of board structure and structural reforms on banking efficiency is further analyzed using panel data regression. We find that board independence has a negative influence on banking efficiency, but it becomes positive when the banks are listed on the stock market. This finding confirms the soft-budget constraint theory, which holds that large banks are less efficient than smaller ones as the former can more easily obtain financial support during times of distress. Further, the listing of state-owned banks positively moderates the relationship between board independence and banking efficiency. The study contributes to the literature on banking reforms, board structure, and banking efficiency. It confirms the theoretical basis for Chinese banking reforms and that banking efficiency has improved since the ownership restructuring.

Suggested Citation

  • Ramiz ur Rehman & Junrui Zhang & Muhammad Akram Naseem & Muhammad Ishfaq Ahmed & Rizwan Ali, 2021. "Board independence and Chinese banking efficiency: a moderating role of ownership restructuring," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 517-536, September.
    • Handle: RePEc:spr:eurasi:v:11:y:2021:i:3:d:10.1007_s40821-020-00155-9
    DOI: 10.1007/s40821-020-00155-9
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    More about this item

    Keywords

    Banking reforms; China bank performance; DEA; SFA; Banking efficiency; Board independence;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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