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Bank nominee directors and corporate performance: micro evidence for India

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  • Nachane, D M
  • Ghosh, Saibal
  • Ray, Partha

Abstract

Banks and financial institutions play a major role in governance of non-financial companies in India through the mechanism of nominee directors. This paper probes two allied issues: firstly, the isolation of the firm specific factors which determine the presence of bank nominee directors on boards and secondly, whether companies, with bank nominee directors exhibit better performance/governance than companies with no banker representation on their boards. A Probit model estimated over a cross-section of Indian manufacturing firms for 2003, indicates that bankers on boards seem to exert a healthy impact on the companies. In fact, large public limited companies are likely to exhibit banker representation, primarily in their role as expertise providers. The evidence from Tobit model reconfirms these results.

Suggested Citation

  • Nachane, D M & Ghosh, Saibal & Ray, Partha, 2005. "Bank nominee directors and corporate performance: micro evidence for India," MPRA Paper 2707, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:2707
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Saibal Ghosh, 2007. "Bank monitoring, managerial ownership and Tobin's Q: an empirical analysis for India," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 129-143.
    2. Ghosh, Saibal, 2016. "Banker on board and innovative activity," Journal of Business Research, Elsevier, vol. 69(10), pages 4205-4214.
    3. Ghosh, Saibal, 2007. "Leverage, managerial monitoring and firm valuation: A simultaneous equation approach," Research in Economics, Elsevier, vol. 61(2), pages 84-98, June.

    More about this item

    Keywords

    Banker; corporate governance; debt equity ratio;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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