Corporate governance in banking: The role of Board of Directors

de Andres Alonso () and Eleuterio Vallelado Gonzalez ()
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de Andres Alonso: Department of Financial Economics and Accounting, University of Valladolid
Eleuterio Vallelado Gonzalez: Department of Financial Economics and Accounting, University of Valladolid

Working Paper from Department of Business Economics, Universitat Autonoma de Barcelona

Abstract: We test hypotheses on the dual role of boards of directors for a sample of large international commercial banks. We find an inverted U shaped relation between bank performance and board size that justifies a large board and imposes an efficient limit to the board’s size; a positive relation between the proportion of non-executive directors and performance; and a proactive role in board meetings. Our results show that bank boards’ composition and functioning are related to directors’ incentives to monitor and advise management. All these relations hold after we control for bank business, institutional differences, size, market power in the banking industry, bank ownership and investors’ legal protection.

Keywords: Corporate Governance; Board of Directors; Commercial Banks (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-cse and nep-eff
Date: 2006-06
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