Cost Efficiency of Russian Banks: the Impact of Board of Directors and Executive Group

Pokrashenko Pavel ()

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: The research investigates an impact of corporate governance on efficiency in the banking industry in a developing economy. It uses the two-stage approach and both ‘structural’ and ‘non-structural’ efficiency measures. The sample contains private-equity banks of different size from 2004Q1 till 2008Q2. The total number of cross-section units is 170; the total number of time units is 18. Our main results are the following: (1) high ownership concentration is favorable for efficiency (the presence of a blockholder reduces costs by 4 per cent), but there are possible wars between large owners; (2) the optimal board size for Russian banks is between 6 and 11 members; (3) the efficiency of banks with longer tenure of board members is higher, also the direction of causality is unclear; (4) the executive group composition does not affect efficiency, except for the share of women; however the nature of this impact remains unclear. Many of our results are consistent with theoretical models of corporate governance and empirical findings from other developed and developing economies. Our results suggest that board’ composition impacts on the efficiency of private equity Russian banks in the same way as in other firms in developed and developing countries. It provides evidence that corporate governance is driven by the same economic forces in all firms, despite of different legislative environment, regulation, industry, and other parameters.

JEL-codes: G21 G32 G34 L25 (search for similar items in EconPapers)
Date: 2012-01-16
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