Board of Directors and Bank Performance: Beyond Agency Theory

Charbel Salloum (), Elie Bouri () and Danielle Khalife
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Charbel Salloum: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine
Danielle Khalife: USEK - Université Saint-Esprit de Kaslik

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Abstract: By integrating agency, stewardship and resource–dependency perspectives, this paper associated three characteristics of the board of directors - outside directors, insiders' equity ownership and leadership duality (Executive Officer also being the Chairman of the Board) - with bank's financial performance in Lebanon. Using a panel model, and after controlling for endogeneity problems, we examined 54 listed and unlisted banks from 2005 to 2010. Our results implied that the presence of outside directors on the board and the leadership duality have no statistical impact on performance. It seems that severe regulations by the Lebanese monetary authority act as an external governance mechanism. On the contrary, insiders' ownership promotes convergence of the interests of managers/shareholders and shapes the performance of banks. Our findings may well urge Lebanese bankers and regulators towards further development and implementation of governance practices to enhance the performance and the stability of one of the pillars of the Lebanese economy.

Keywords: board of directors; corporate governance; financial performance; Lebanese banks; outside directors; insider ownership; leadership duality; Lebanon; bank performance; agency theory; stewardship; resource dependency; banking industry; executive directors; non–executive directors (search for similar items in EconPapers)
Date: 2013
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Published in International Journal of Business Governance and Ethics, 2013, 8 (3), pp.265 - 288. ⟨10.1504/IJBGE.2013.057379⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01369719

DOI: 10.1504/IJBGE.2013.057379

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