corporate governance and bank performance: evidence from macedonia

8/11/2019 Corporate Governance and Bank Performance: Evidence from Macedonia

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UDCG ##5.21G33".72.#21 P 33.71"!7.7F *EG


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5idanos)i, 5", et al", Corporate o!ernance, E *2014, +ol" 4, -o, 1.2, .

77

mana&ial isc&$ion, 0ic can /& a/%s&. :is 0as $& s$a$in oin$ 'o $& s%/s&M%&n$

aca&mic $inin on cooa$& o+&nanc& :iol&, 2##, . 15F. @o0&+&, i' mana&m&n$

0as $& 'ocal oin$ 'o $& 2#$ c&n$%y, cooa$& o+&nanc& is s&$ $o /& $& imay 'oc%s

'o $& 21s$ c&n$%y :ic&, 2#12F. :& $&m corporate go!ernance&i+&s 'om an analoy

/&$0&&n $& o+&nm&n$ o' ci$i&s, na$ions o s$a$&s an $& o+&nanc& o' cooa$ions

B&c$, Bol$on an Rp&ll, 2##3, . 2F. Lo go!ernanceis anci&n$, an com&s 'om $&


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Economic nalysis *2014, +ol" 4, -o" 1.2, .

78

a/o%$ cooa$& o+&nanc& 0i$$&n /y Sl&i'& an =isny, i+& $& ans0& on M%&s$ion

a/o%$ sa&ol&s s&c%i$y. :&y &'in& cooa$& o+&nanc& in $&ms o' 'inancial in$&&s$s

o' in+&s$os. In a$ic%la, $&y &'& $o cooa$& o+&nanc& as &alin in 0ic s%li&s

o' 'inanc& $o cooa$ions ass%& $&ms&l+&s o' &$$in a &$%n on $&i in+&s$m&n$ Sl&i'&

an =isny, 1!!7, . 737F. Boa m&m/&s 0o roc) the boatmi$ 'in $&y are left out in the

cold Caol an B%col$, 2##!, . 128F. om /%sin&ss &$ics &s&c$i+&s, cooa$&

o+&nanc& can /& consi&& as an &n+ionm&n$ o' $%s$, &$ics, moal +al%&s an

con'i&nc& - as a syn&ic &''o$ o' all $& cons$i$%&n$s o' soci&$y Co0$& an Aas, 2##!F.

O% in$&al an &cl&c$ic &'ini$ion consi&s $& cooa$& o+&nanc& as a sys$&m 0ic

&ns%&s $a$ a comany is %n in $& /&s$ bona fideF s$a$&ic i&c$ion 'o all s$a&ol&s.

inancial ma&$s &ss&n$ially in+ol+& $& alloca$ion o' &so%c&s. :&y can /& $o%$ as

$& brain o' $& &n$i& &conomic sys$&m, $& c&n$al loc%s o' &cision-mainG i' $&y 'ail, no$

only 0ill $& s&c$oWs o'i$s /& lo0& $an $&y 0o%l o$&0is& a+& /&&n, /%$ $&

&'omanc& o' $& &n$i& &conomic sys$&m may /& imai& S$ili$, *aamillo-=all&)o an

6a, 1!!3, . 23F. :&&'o&, $& imo$an$ o' /ans as ominan$ playersin 'inancialgamesis

ci$ical 'o o$& &conomic a&n$s. :& /anin s&c$o is no$ n&c&ssaily $o$ally cooa$&.

Banin as a s&c$o as /&&n %niM%& an $& in$&&s$s o' o$& s$a&ol&s a&a mo&

imo$an$ $o i$ $an in $& cas& o' non-/anin an non-'inanc& oanisa$ions. In $& cas& o'

$ai$ional man%'ac$%in cooa$ions, $& iss%& as /&&n $a$ o' sa'&%ain an

maKimisin $& sa&ol&Qs +al%&. In $& cas& o' /anin, $& is in+ol+& 'o &osi$os

an $& ossi/ili$y o' con$aion ass%m&s &a$& imo$anc& $an $a$ o' cons%m&s o'

man%'ac$%& o%c$s. Bans %& a$yical con$ac$%al &la$ionsi, in $&i cooa$&

o+&nanc& mo&l so%l incl%& $& &osi$os an sa&ol&s ac&y an OQaa,

2##3F. %$&, $& in+ol+&m&n$ o' o+&nm&n$ is &K$&m&ly i& in /ans %& $o

imo$anc& o' s$a/ili$y o' 'inancial an &conomic sys$&m as 0&ll as /&ca%s& &nla& in$&&s$

o' all &conomic a&n$s. S$a/ili$y o' /ans as a ominan$ 'i%& in 0ol& 'inancial sys$&ms

con$i/%$& 'o oo '%nc$ionin o' na$ional &conomy an omo$&s &conomic o0$

@&m&s, 1!!"P &+in&, 1!!7P Ra)an an (inal&s, 1!!8P L%l&, 2###F.


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7!

a+& a i&c$ in$&&s$ in /an &'omanc&. On a mo& a&a$& l&+&l, &%la$os a&

conc&n& 0i$ $& &''&c$ o+&nanc& as on $& &'omanc& o' 'inancial ins$i$%$ions

/&ca%s& $& &al$ o' $& o+&all &conomy &&ns %on $&i &'omanc& Aams an

&an, 2##3, . 12"F.

:& cooa$& o+&nanc& o' /ans in &+&loin &conomi&s is imo$an$ 'o s&+&al

&asons. is$, 'inancial sys$&m in &+&loin &conomy, &n&ally, as ominan$ /anin

caac$&is$ics 'om $a$ &ason $a$ 'inancial s&c$o is $oo /an-c&n$ic. S&con, as 'inancial

ma&$s a& %s%ally %n&&+&lo&, /ans in &+&loin &conomi&s a& $yically $& mos$

imo$an$ so%c& o' 'inanc& 'o $& ma)oi$y o' comani&s. :i, as 0&ll as o+iin a

&n&ally acc&$& m&ans o' aym&n$, /ans in &+&loin co%n$i&s a& %s%ally $& main

&osi$oy 'o $& &conomyQs sa+ins. o%$, many &+&loin &conomi&s a+& &c&n$ly

li/&alis& $&i /anin sys$&ms $o% i+a$isa$ionHisin+&s$m&n$s, m&&s an

acM%isi$ions, 'inancial li/&alisi$ion, &%cin $& ol& o' &conomic &%la$ion an &%cin

'o&in cai$al &s$ic$ions. Cons&M%&n$ly, mana&s o' /ans in $&s& &conomi&s a+&

o/$ain& &a$& '&&om in o0 $&y %n $&i /ans A%n an :%n&, 2##"F. inally, $&

/&s$ con'im 'o imo$anc& o' cooa$& o+&nanc& 'o /ans in &+&loin co%n$i&s,

&s&cially in Eas$&n E%o&, is a s$a$&m&n$ o' anain i&c$o o' Coa$ian /anin

associa$ion (oan Boac& 0o says $a$, is not a 'uestion of #hether #e need corporate

go!ernance, but ho# to do it and sur!i!e.

$e9al fraewor0

Cooa$& o+&nanc& o' ac&onian /ans is a c%cial i$&m 0ic is 0o$ consi&in

0i$ &a$ imo$anc& /y $& &conomis$s no0aays, as $& /ans a& 'im 'o%na$ion o' $&

&conomy o' a co%n$y. :is no$a$ion &masis&s $& imo$anc& o' oo cooa$&

o+&nanc& 0ic can /& aci&+& 0i$ a s$a/l& la0 &%la$in $is s%/)&c$ i.&. in a s$a/l&

ins$i$%$ional an l&al &n+ionm&n$ 0ic %aan$&& in+&s$o o$&c$ion lege artis.

@is$oically, $& /asics o' $& cooa$& o+&nanc& o' $& /ans in $& R&%/lic o'

ac&onia 0&& in$&al a$ o' $& a0 o' Bans an Sa+ins-Bans O''icial


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8#

m&m/&sP A$icl& !2F $& anain /oa is consis$& o' a$ l&as$ 2, /%$ no$ mo& $an 7

m&m/&s. Unli& $& &+io%sly m&n$ion& a0s, $is ac$ ma&s cl&a is$inc$ion /&$0&&n

$& &sonsi/ili$i&s o' $& /oas.

Li$ &a $o $& a0 o' Bans as a le$ specialis, $&& a& '&0 mo& la0s an /yla0s

$a$ n&& $o /& consi&& 0&n &%la$in $& ac$i+i$i&s o' $& /ans. On& o' $& imo$an$

la0s is $& a0 on O/lia$ions O''icial


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81

/ans. o analy$ical %os&s, $& Na$ional Ban NBRF o%s $& /ans in$o $&&

o%s, accoin $o $& si& o' $&i ass&$sG small, m&i%m an la& /ans. Banin

n&$0o is s&a o+& almos$ all ci$i&s in $& co%n$y an consis$s o' "13 /%sin&ss %ni$s

0ic incl%&s $& &aM%a$&s o' /ansF, /%$ $& main conc&n$a$ion o' $& n&$0o

&main& in $& cai$al ci$y. Coma& 0i$ $& &+io%s y&a, $& n%m/& o' $& /%sin&ss

%ni$s '&ll /y $0&n$y-$&&. In $& /anin s&c$o $& o0n0a $&n o' $& n%m/& o'

&mloy&&s con$in%&. In 2#11, $& n%m/& o' &mloy&&s in /ans '&ll /y "1. Ai$ionally,

con$in%& $& $&n o' M%ali$y imo+&m&n$ in &a $o $& M%ali'ica$ion s$%c$%& o' $&

&mloy&&s in $& /anin sys$&m NBR, 2#12F.

D%& $o $& o+&0&lmin imo$anc& 'o ac&onian &conomy, /an o&a$ions an

cooa$& o+&nanc& a& &%la$& /y &+io%sly m&n$ion& la0s an /yla0s. Conc&$&ly,

accoin $o $& l&al ac$s, &ac /an in ac&onia as &s$a/lis& i$s o0n cooa$&

o+&nanc& s$%c$%& coma$i/l& 0i$ $& na$%& an sco& o' ac$i+i$i&s &'om&. :& 'o%

mos$ imo$an$ /anQs a%$oi$i&s a+& a $o$al o' 3#" m&m/&s an $&y &&s&n$in 5.1

coma& 0i$ $& $o$al n%m/& o' &mloy&&s in $& /ans a$ $& &n o' 2#11. N&+&$&l&ss,

mos$ o' $&s& &ol& a& m&m/&s o' $& S%&+isoy /oa 1#2 m&m/&sF.


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/&'o& ao+in $&m an ma& s%& $a$ a&M%a$& con$ols an sys$&ms a& in lac& $o

i&n$i'y an a&ss conc&ns /&'o& $&y /&com& ma)o o/l&ms. D%in /a $im&s, a

/oa $a$ is ac$i+& an in+ol+& can &l a /an s%+i+& i' i$ is a/l& $o &+al%a$& o/l&ms,

$a& co&c$i+& ac$ions, an 0&n n&c&ssay, && $& ins$i$%$ion on $ac %n$il &''&c$i+&

mana&m&n$ can /& &&s$a/lis& an $& /anQs o/l&m &sol+&


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83

OKl&y 0il& small /an /oa si& &mains s$a/l&, mo& in&&n&n$ an $&&'o& $oo l&ss

is. Small& /oas in /an oanisa$ions a& /&li&+& $o /& associa$& 0i$ /&$$&

o+&nanc& M%ali$y an /an &'omanc& o no$ &la$& 0i$ $&s& o%$com&s E&ns, @%n

an a$os, 2#12F. o&o+&, & An&s an =all&lao 2##8F in+&s$ia$& ! /ans 'om

&+&lo& co%n$i&s an so0 an in+&$& U-sa& &la$ion /&$0&&n /an &'omanc&

'om $& on& si&, an /oa si& an o%$si& /oa comosi$ion 'om $& o$& si&. :%s,

$& &Kc&ssi+& no$ o$imalF incl%sion o' more and more o%$si& i&c$os i no$ &s%l$ in

osi$i+& /an &'omanc&s. i&0is&,


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8"

D1d> %he si(e of the Super!isory board is significantly and positi!ely related to ban) capital

re'uirement measured by C


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85

Also, $&y &o$s 'o s$a/l& /oa comosi$ion o' la& /anin 'ims, in a $im& san o'

$i$y y&as, 0i$ $& 'ac$ion o' non-insi&s i&c$os70ic a+i$a$&s ao%n #.85.

A$ $is lac& is +&y imo$an$ $o ili$ $& &s%l$s o' s$%y ma& /y Ros&ns$&in an

Lya$$ 1!!7F. :&y in+&s$ia$& $& s$oc ma&$ &ac$ion o' anno%nc&m&n$s a/o%$ insi&

i&c$o aoin$m&n$s an 'in sini'ican$ly n&a$i+& &ac$ion 0&n insi& i&c$os o0n

l&ss $an 5 o' $& 'imWs common s$oc, sini'ican$ly osi$i+& 0&n $&i o0n&si l&+&l is

/&$0&&n 5 an 25, an insini'ican$ly i''&&n$ 'om &o 0&n o0n&si &Kc&&s 25.

:&s& &s%l$s %n&lin& $& /&n&'i$s o' a& insi& i&c$oWs &K&$ no0l&&, /%$ only

0&n mana&ial an o%$si& sa&ol& in$&&s$s a& clos&ly alin&.

On $& o$& si&, omo$&s o' insi& omina$& /oas 'in an in+&s& associa$ion

/&$0&&n /oa in&&n&nc& an 'im +al%&. Boa in&&n&nc& also ma$$& $o $& /oa

si&, o0$ an na$%& o' o0n&si. @&nc&, 6&+os$, Rao an @ossain 2##2F oo' $a$ $&

oo$ion o' o%$si&s on $& /oa is osi$i+&ly associa$& $o /oa si&, n&a$i+&ly &la$&

$o '%$%& o0$ an nonlin&aly &la$& $o insi& o0n&si. Ai$ionally, o$& a%$os

&conis& $a$ comani&s 0ic a in&&n&n$ i&c$o in&&n&n$ /oasF $&n $o

&c&as& cooa$& &'omanc&, &s&cially s$oc ma&$ &'omanc& Aslan, 9aan an

Esi, 2#1#F. o&o+&, San an V%, 2#12F in+&s$ia$& $& M%&s$ion o' /oa in&&n&nc&

an, on &n&al, i no$ 'in sini'ican$ &la$ionsi in $&ms o' &'omanc&. In &a $o

$& 'inancial 'ims, E&ns, @%n, an a$os 2#12F o+i& som& &+i&nc& $a$ /ans 0i$

$& in&&n&n$ /oas is 'ac& 0i$ 0os& s$oc ma&$ osi$ions %in $& cis&s &io.

Lan, % an && 2#12F %s& moi'i& a$a &n+&lom&n$ analysis DEAF 'o &s$ima$ion o'

/an &'omanc& an &+&al a n&a$i+& imac$ 'om /oa si& an o%$si& i&c$o

&s&nc&. In$&&s$inly, S%/amanyam, Ranan an Ros&ns$&in 1!!7F in+&s$ia$&s $&

&''&c$s an ol& o' o%$si& an in&&n&n$ i&c$os in ma&$ o' cooa$& con$ol ac$i+i$i&s

an 'in $a$ a/nomal ma&$ &$%ns a+& sini'ican$ly an n&a$i+& associa$ion 0i$ a$io

o' in&&n&n$ o%$si&s in &+&y &&ssion.

In &n&al, 0& a&& 0i$ Daily an Dal$on 1!!3F a%m&n$s an $&&'o& 0& s%os&

$a$ /oa 0i$ many in&&n&n$ i&c$os so0 a i &''&c$i+&n&ss an &nanc&

&'omanc&. @&& 'om, $& yo$&s&s $o $&s$ $& sini'icanc& o' $& imac$ o' /oa

comosi$ion a& &'in& 0i$ $& 'ollo0in s$a$&m&n$sG

D2a> %he Super!isory board independence is significantly and positi!ely related to ban)@s

profitability measured by %he Super!isory board independence is significantly and positi!ely related to ban)@s

efficiency measured by CI


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8

in &clinin &ios. :oay +aio%s s$a&ol& o%s /&an $o &masis& $& conc&$ o'

/oa i+&si$y as $& one best #ay. A%m&n$s 'o i+&si$y in $& /oaoom a& /o$

&conomic an &$ical =an & Lal$ an Inl&y, 2##3F. Boa i+&si$y %s%ally is osi$i+&

&la$& 0i$ 'inancial a$ios. Con+&s&ly, /oa i+&si$y can also &n&a$& +aio%s cos$s

associa$& 0i$ cooina$ion o/l&ms an &cision-main $im&s o/&s an illi&n,

1!!!F. %$&, /oa i+&si$y may coo& co&sion an l&a $o a l&ss coo&a$i+& an

con'lic$s 0i$in o% a% an %nian, 2##5F. In a$ic%la, @a&no'' an 9&as&y

2##8F s%&s$ $a$ occ%a$ional, $&n%& an a& i+&si$y a +al%& 'o /ans 0ils$ &n&

i+&si$y i no$ c&a$& $& &conomic +al%& 'o sa&ol&s. In ai$ion, $&y concl%& $a$

$& /oa 0i$ m%l$il& i&c$osis $&ns $o /& in&''&c$i+& in %s%in is moni$o

'%nc$ion. O% a& &Kamin&s /oaQs &Ki/i$ &$&o&n&i$y %& $o &sonal /aco%n

s%c as &%ca$ion 6.D. olsF B&&, 9ic an Sca&c, 2#13F, l&al /aco%n

ci$i&nsiF an &n&. %ali'i& 0om&nQs an 'o&in&s on /oas so%l inc&as&

cooa$& &'omanc& $o% i''&&n$ &K&$is&, a+ic&, /&$$& )%m&n$ an o&

&cisions. Na$%ally, i$ is n&c&ssay $o o+i& &miical &+i&nc& 'o $isin$%i$i+&Hcon+&n$ional 0isom an e$ ante concl%sions. In o$& 0os, i$ is imo$an$ $o

consi& lass c&ilin &nom&non in /an /oaQs i.&. 0&$& 0om&n in ac&onian

/ans a& a/l& $o /&a $&glass barriersin /an i&acy.

+'* Zualities

6o0& o' CEO is &$&mina$& /y $& CEO $&n%&


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87

2##3F, CEOQs o' 'inancial comani&s as lo0& o0n&si 2.3F $a$ CEOQs o' non-'inancial

oanisa$ions 2.!F. :is l&+&l o' CEO o0n&si in /ans, co&sonin 0i$ m&n$ion&

&c&n$a&s 0ic acc&l&a$& /an &'omanc& in $& s$%y o' oc, Sl&i'& an =isny

1!88F.

Figure 1. The framework for the relationship between the corporate governance and banks

performance

'3irical research

The odel

In $is s&c$ion is in+&s$ia$& $& &la$ion /&$0&&n $& cooa$& o+&nanc& 0i$ $&

/anQs &'omanc& %sin oinay l&as$ sM%a&s OSF &&ssions. o% m&as%&s a& %s&

$o o/s&+& /an &'omanc&G (eturn on assets U(*,W calc%la$& as o'i$ a'$& $aK&s

i+i& /y $o$al ass&$s o' a /anP (eturn on eZuit U(*'W calc%la$& as o'i$ a'$& $aK&si+i& /y $o$al &M%i$y o' a /anP +ost-%ncoe ratio 0ic is %s& as a M%ic $&s$ o'

&''ici&ncy 0ic &'l&c$s $& non-in$&&s$ cos$s as oo$ion o' n&$ incom&P an +a3ital

adeZuac ratio U+,(W &K&ss& as oo$ion o' 'inancial cai$al $o $& is-0&i$&

ass&$s. :&s& 'o% m&as%&s &&s&n$ $& &&n&n$ +aia/l&s in $& s$%y.

:& /oa s$%c$%& in $is a& is &sci/& in $&& im&nsionsG /oa si&, /oa

comosi$ion an CEO M%ali$i&s. I$ is imo$an$ $o no$& $a$ $& /anin sys$&m in ac&onia

&Ki/i$s $0o-$i& cooa$& o+&nanc& comos& o' S%&+isoy SBF an anain /oa

BF. Sinc& $& &sonsi/ili$i&s o' $& m&m/&s in $& S%&+isoy /oa a& a$$i/%$&

&a$& imo$anc& 'o $& /anQs cooa$& o+&nanc&, $& S%&+isoy /oa is i+&n

&'&&nc& $o s$%y i$s comosi$ion an si&. @&nc&, $& ma)oi$y o' in&&n&n$ +aia/l&sa& &i+& 'om $& a$a coll&c$& a/o%$ $& S%&+isoy /oa, 0il& '&0 o' $&m &la$& $o

$& anain /oa. Non&$&l&ss, sinc& $& CEO al0ays ac$s as 6&si&n$ o' $& anain

/oa an mo& imo$an$ly /&as m%c o' $& &sonsi/ili$y 'o $& /anQs &'omanc&, is

M%ali$i&s a& i+&n s&ci'ic imo$anc& in $& s$%y an a& analys& 0i$in a s&aa$&

im&nsion.

Eac o' $& in&&n&n$ +aia/l&s is /i&'ly &Klain& in $%n. :& si& o' Su3er5isor

board US#S%@'W an $& si& o' 6ana9in9 board U6#S%@'W a& /o$ m&as%& %sin a

na$%al loai$m o' $& $o$al n%m/& o' m&m/&s in &ac o' $&m, 0ic is alin& 0i$ $&

s$%i&s o' & An&s, Ao'a an o& 2##5F an *aclin an *ol 2##!F. Boa

comosi$ion as a im&nsion o' $& /oa s$%c$%& is &&s&n$& 0i$ $& 'ollo0in


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88

+aia/l&sG Su3er5isor board %nde3endence US#%N)'P'N)W 0ic &'l&c$s $& n%m/& o'

non-&K&c%$i+& m&m/&s as oo$ion o' $o$al n%m/& o' m&m/&s in $& /oaP Forei9n

ebers of Su3er5isor board ratio UFS#(,T%*W&'in& as oo$ion o' m&m/&s $a$

a+& no$ acM%i& ac&onian ci$i&nsi $o $& $o$al n%m/& o' /oa m&m/&sP oen

ebers of Su3er5isor board ratio US#(,T%*W 0ic, similaly, is &'in& as

oo$ion o' $& 0om&n m&m/&s $o $& $o$al n%m/& o' m&m/&s in $& /oaP an

Su3er5isor board educational ratio &K&ssin $& oo$ion o' m&m/&s in $&

S%&+isoy /oa olin 6.D. :& $i im&nsion, &sci/& 0i$ $& CEO M%ali$i&s,

incl%&s $& 'ollo0in m&as%&s as %mmy +aia/l&sG %mmy 'o CEO $o is$in%is

0&$& $& +'*is forei9nci$i&n i+&n +al%& 1F o no$ i+&n +al%& #FP %mmy 'o +'*

ownershi3 0ic &$s +al%& 1 i' $& CEO o0ns /anQs sa&s an # i' no$P an %mmy

+aia/l& 'o $& +'* 3ower&K&ss& as $& lon&+i$y o' $& CEO s&+in on $is osi$ion

+al%& 1 'o mo& $an a 'o%-y&a $&m o +al%& # 'o &Kac$ly on& $&mF. :& o$& +aia/l&s

in%$$& in $& s$%y a& no$ i&c$ly &la$& $o $& /oa s$%c$%&, an a&, $%s, o%&

as con$ol +aia/l&s. :&s& incl%&G #an0s a9e U,2'Wcalc%la$& as a na$%al loai$m o' $&i''&&nc& /&$0&&n $& incil& y&a o' analysis an $& y&a o' /anQs 'o%na$ionP

+redits)e3osits ratio U+)(,T%*W &'in& as oo$ion o' /anQs $o$al c&i$s l&n $o i$s

cli&n$s $o $& $o$al &osi$s i$ &&sP an #an0s nature U#,NT"('W %s& as a %mmy

+aia/l& $o &no$& 0&$& $& /an is a s%/siiay o' a m%l$ina$ional /an i+&n +al%& 1F o

no$ i+&n +al%& #F. D&sci$ion o' all $&s& +aia/l&s is &s&n$& in :a/l& 1.

Table 1. Definition of variables

Variable )efinition

3easures of ban) performance *dependent !ariables

R&$%n on ass&$s ROAF

R&$%n on &M%i$y ROEF

Cos$-Incom& a$io CIRA:IOF

Cai$al a&M%acy a$io CARF

6o'i$ a'$& $aK&sH:o$al ass&$s

6o'i$ a'$& $aK&sH:o$al &M%i$y

Non-in$&&s$ cos$sHN&$ incom&

inancial cai$alHRis-0&i$& ass&$s

3easures of board structure *independent !ariables

#oard si/e

Si& o' S%&+isoy /oa SBSI(EF

Si& o' anain /oa BSI(EF

#oard co3osition

S%&+isoy /oa in&&n&nc&

SBINDE6ENDF

o&in m&m/&s o' S%&+isoy /oa

a$io SBRA:IOF

Lom&n m&m/&s o' S%&+isoy /oa

a$io LSBRA:IOF

S%&+isoy /oa &%ca$ional a$io

na$%al loai$m o' $& $o$al n%m/& o' m&m/&s in $&

S%&+isoy /oa

na$%al loai$m o' $& $o$al n%m/& o' m&m/&s in $&anain /oa

oo$ion o' non-&K&c%$i+& m&m/&s in $& S%&+isoy

/oa

oo$ion o' 'o&in m&m/&s in $& S%&+isoy /oa

oo$ion o' 0om&n m&m/&s in $& S%&+isoy /oa

oo$ion o' m&m/&s in $& S%&+isoy /oa olin


14/24


8!

EDUSBRA:IOF

+'* Zualities

D%mmy 'o CEO CEOF

D%mmy 'o CEO o0n&si CEOOLNF

D%mmy 'o CEO o0& CEO6OLERF

6.D.

1G i' $& CEO is 'o&in ci$i&nP

#G i' o$&0is&.

1G i' $& CEO o0ns /anQs sa&sP

#G i' o$&0is&.

1G i' $& CEO s&+&s lon& $an on&-$&m " y&asFP

#G i' o$&0is&.

Control !ariables *independent !ariables

BanQs a& A


15/24


!#

:& las$ o' $& mo&ls &+&lo& is $o m&as%& $& &la$ionsi /&$0&&n $& CEO

M%ali$i&s &'in& as %mmy +aia/l&s 0i$ $& /anQs &'omanc& %sin $& 'ollo0in

&M%a$ionG

Di''&&n$ m&$os a& a+aila/l& $o sol+& 'o $& aam&$&s in $& i+&n &M%a$ion, /%$ $&

mos$ siml& on& is /y %sin ool& oinay l&as$ sM%a&s OSF, 0ic is &mons$a$& in

io s$%i&s s%c as Boon&, i&l, 9ao'' an Ra&)a 2##7F, Col&s, Dani&l an Na+&&n

2##8F an inc, N&$$& an an 2##8F. :is m&$o minimis&s $& s%m o' sM%a&

+&$ical is$anc&s /&$0&&n $& o/s&+& &sons&s in $& a$as&$ an $& &sons&s &ic$&

/y $& lin&a aoKima$ion $o &s$ima$& $& %nno0n aam&$&s in $& &&ssion mo&l.

Sa3le and data

:& saml& %s& in $& &+&lom&n$ o' $& mo&l incl%&s 15 o%$ o' 17 /ans, $%s&&s&n$in 88 o' i$s s$a$is$ical o%la$ion. :& a$a coll&c$& 'o $& s$%y a& &K$ac$&

'om s&+&al so%c&s, incl%in $& o''icial 0&/si$&s o' $& Na$ional /an o' $& R&%/lic o'

ac&onia NBRF an $& ac&onian s&c%i$i&s &Kcan& commission, $& o''icial si$&s o'

$& /ans in M%&s$ion, an $& 'inancial an oKy s$a$&m&n$s %/lis& /y $& /ans a$ $&

&n o' $& y&a. In $is 0ay, $& n%m&ical a$a $o calc%la$& $& &&n&n$ +aia/l&s an

som& o' $& con$ol +aia/l&s a& &i+& 'om $& 'inancial s$a$&m&n$s, $& a$a a/o%$ $&

/oa si& an comosi$ion a& &K$ac$& 'om $& o''icial si$&s o' $& /ans an $& o''icial

si$& o' NBR, $& in'oma$ion 'o $& CEO M%ali$i&s a& &ominan$ly /as& on $&

%/lica$ions on $& 0&/si$& o' $& ac&onian s&c%i$i&s &Kcan& commission, 0il& $&

a$a 'o som& +aia/l&s s%c as $& /anQs a& an i$s o0n&si s$%c$%& com& 'om $&oKy s$a$&m&n$s an som& 0&/ a&s on $& /anQs o''icial 0&/si$&s. :& &miical a$a

%s& as in%$s in $& s$%y 'o $& /ans a+& /&&n o/s&+& 'o $& 2##8-2#11 &io 0i$ a

$o$al n%m/& o' # o/s&+a$ions.

,nalsis1 findin9s and concludin9 rear0s

:& 'inins 'om $& 'is$ &&ssion mo&l s&& in :a/l& 2AF &mons$a$& $a$ $& si& o'

/o$, $& S%&+isoy an $& anain /oa, a& osi$i+&ly &la$& $o $& /anQs

o'i$a/ili$y m&as%& /y ROA. I$ m&ans $a$ any inc&as& in $& n%m/& o' m&m/&s in on&

o' $&s& /oas is li&ly $o &s%l$ in inc&as& /anQs o'i$a/ili$y. :is may /& &Klain& /y

$& 'ac$ $a$ $& aoin$m&n$ o' n&0 m&m/&s in &ac o' $& $0o /oas 0ill o%c&

s$on& &cision-main oc&ss $a$ may /oos$ /an &'omanc&. In $is 0ay, $&

yo$&sis s$a$& as is &)&c$&. Li$ &a $o $& imac$ on $& o'i$a/ili$y m&as%&

/y ROE, non& o' $& +aia/l&s in $& mo&l as sini'ican$ &la$ion, 0ic &'l&c$s $o /&

%ns%o$&. %$&mo&, a sini'ican$ an osi$i+& &la$ionsi &Kis$s /&$0&&n $& si& o'

$& anain /oa an $& Cos$-Incom& a$io, 0ic imli&s $a$ $& ac&onian /ans

0i$ la& anain /oa 0ill /& a/l& $o imo+& /anQs &''ici&ncy /&$$& $an $os& 0i$

small& on&. In &la$ion $o $& cai$al &M%i&m&n$ m&as%& /y $& Cai$al a&M%acy a$io,

$& /ans 0i$ small& anain /oa $&n $o ol a la& &c&n$a& o' $&i liM%ii$y

ass&$s aains$ $&i is-0&i$& ass&$s as imli& $o% $& sini'ican$ an n&a$i+&


16/24


!1

&la$ion. A &asona/l& &Klana$ion 'o $is co%l /& $a$ $& small& anain /oa canno$

&''ici&n$ly mana& is o' $& /anQs cai$al /&ca%s& $& lac o' 'inancial &K&$is&, 0ic

s%/s&M%&n$ly l&as $o0as inc&as& is a+&sion. No sini'ican$ &la$ionsi as /&&n

&mons$a$& /&$0&&n $& si& o' S%&+isoy /oa an CIRA:IO, 0ic imli&s $a$ $&

yo$&sis canno$ /& s%o$&. @o0&+&, $& si& o' $& S%&+isoy /oa &K&$s

sini'ican$ly n&a$i+& &''&c$s on $& Cai$al a&M%acy a$io an $%s $& yo$&sis is

&)&c$&. :& analysis also &Kamin&s $& imac$ o' /anQs a& as a con$ol +aia/l& on &ac o'

$& &&n&n$ +aia/l&s an o+&s $a$ $&& is a sini'ican$ an osi$i+& &la$ionsi only

$o $& cai$al &M%i&m&n$. :a$ is, $& ac&onian /ans %s%ally $&n $o inc&as& $&

'inancial cai$al &l 'o liM%ii$y %os&s o+& $im&. Imo$an$ly, $& ass&ssm&n$ o' $is

mo&l &mons$a$&s no sini'icanc& in $& &la$ion /&$0&&n /anQs a& an i$s o'i$a/ili$y,

0ic m&ans $a$ $& commonly %s& a$ional& $a$ $& ol /ans &'om /&$$& &s%l$s

o&s no$ n&c&ssaily aly in $& cas& 0i$ ac&onia.

Table 2A. Effects of board size on bank performance

ROA ROE CIRATIO CAR

C -0.146930***

(0.036525)**

-0.376426*

(0.220806)

1.080552***

(0.294811)**

0.609368***

(0.121774)**

SBSIZE 0.056854***

(0.021467)**

0.103667*

(0.129774)

-0.216034***

(0.173268)**

-0.138791***

(0.071570)**

MBSIZE 0.032109***

(0.015318)**

0.088306*

(0.092604)

0.276174***

(0.123641)**

-0.276880***

(0.057071)**

AGE 0.001694***

(0.005875)**

0.032068*

(0.035518)

-0.067618***

(0.047423)**

0.045025***

(0.019588)**

No. of observations

0.25

60

0.08

60

0.10

60

0.41

60

Signs *, ** and *** denote statistical significance at 10%, 5% and 1% level, respectively. Robust standard

errors are reported in parentheses.

om $& ass&ssm&n$ o' $& +aia/l&s in $& s&con mo&l s&& in :a/l& 2BF, i$ is +isi/l&

$a$ $&& is a sini'ican$ imac$ in n&a$i+& i&c$ion o' $& /oaQs in&&n&nc& m&as%&

/y $& oo$ion o' non-&K&c%$i+& m&m/&s s&a$& in $& S%&+isoy /oa $o /anQs

o'i$a/ili$y m&as%& /y ROA an ROE. S%c concl%sion s$i&s 0i$ n%m&o%s s$%i&s on

$is $oic, incl%in $& s$%y in $& 'i&l o' a&ncy $&oy, an l&as $& yo$&s&s

an $o /& %ns%o$&. @o0&+&, $& 'inins so0 $a$ $&& is a osi$i+& associa$ion

o' $& oo$ion o' non-&K&c%$i+& m&m/&s $o $& Cos$-Incom& a$io, imlyin $a$ an

inc&as& o' $is oo$ion in $& S%&+isoy /oa o' ac&onian /ans is li&ly $o /oos$

/anQs &''ici&ncy. :is s%/s&M%&n$ly l&as $o $& concl%sion $a$ $& yo$&sis s$a$& as

canno$ /& &)&c$&. :& &s%l$s also s%&s$ $& &Kis$&nc& o' a osi$i+& &&n&nc& o'

S%&+isoy /oa in&&n&nc& on $& Cai$al a&M%acy a$io, m&anin $a$ $& /an 0ill

%s%ally &'& is a+&sion an $&&'o& ol mo& liM%ii$y ass&$s as &s%l$ o' $& inc&as&

o' o%$si&s 0i$in $& /oa. :& yo$&sis $%s canno$ /& &)&c$&. :& ass&ssm&n$ o'

$& &&ssion mo&l also yi&ls &s%l$s $a$ o+& $& &Kis$&nc& o' a sini'ican$ an n&a$i+&


17/24


!2

&la$ionsi /&$0&&n $& oo$ion o' '&mal& m&m/&s o' $& S%&+isoy /oa an /anQs

&'omanc& m&as%& /y ROA, imlyin $o $& concl%sion $a$ $& /ans in ac&onia

0i$ a la& oo$ion o' 0om&n o no$ &'om /&$$& &s%l$s $an $& o$&s. In ai$ion,

$& 'inins &+&al a s$a$is$ically sini'ican$ an s$on osi$i+& associa$ion o' $& Lom&n

m&m/&s o' S%&+isoy /oa a$io $o $& Cos$-Incom& a$io, 0ic s%&s$s $a$ $&

&s&nc& o' '&mal& m&m/&s in $& S%&+isoy /oa may s$ill /& )%s$i'i& $a$ $&y can

/in com&$&nc&s $o imo+& s%&+ision $a$ is li&ly $o /oos$ /anQs &''ici&ncy. No

sini'ican$ &la$ionsi as /&&n &mons$a$& in $& &la$ionsi /&$0&&n $& o&in

m&m/&s o' S%&+isoy /oa a$io an S%&+isoy /oa &%ca$ional a$io as in&&n&n$

+aia/l&s an $& &&n&n$ +aia/l&s.

Table 2B. Effects of board independence on bank performance

ROA ROE CIRATIO CAR

C 0.034611***(0.012728)**

0.129448**(0.083492)*

0.490905**(0.278364)*

0.129339**(0.056086)*

SBINDEPEND -0.107632***

(0.031599)**

-0.422532**

(0.207277)*

1.720315**

(0.691062)*

0.351122**

(0.139239)*

FSBRATIO 0.008632***

(0.017053)**

-0.028457**

(0.111958)*

-0.199803**

(0.372937)*

0.001963**

(0.075141)*

WSBRATIO -0.073939***

(0.026459)**

-0.014992**

(0.173555)*

1.241374**

(0.578634)*

-0.103572**

(0.116586)*

EDUSBRATIO -0.035476***

(0.025361)**

-0.067783**

(0.166352)*

0.507813**

(0.554619)*

-0.047632**

(0.111748)*

No. of observations0.2560 0.0860 0.1060 0.4160



L&n m&as%in $& imac$ o' $& CEO M%ali$i&s on /anQs &'omanc& s&& in :a/l&

2CF, $& &s%l$s s%&s$ a sini'icanc& an osi$i+& associa$ion o' $& n%m/& o' $&ms

s&+in as CEO an /anQs o'i$a/ili$y m&as%& /y ROA an ROE. I$ m&ans $a$ $& /ans

in ac&onia mana& /y CEOs $a$ ol $is osi$ion 'o a lon& &io o' on& 'o%-y&a

$&m a& mo& o'i$a/l& $an $os& 0i$ CEOs s&+in $&i 'is$ $&m as s%c. :&

yo$&s&s an $%s canno$ /& s%o$&. %$& in $is analysis, $&& is asini'ican$ an n&a$i+& imac$ o' $& l&n$ o' $&m on /anQs &''ici&ncy m&as%& /y $&

Cos$-Incom& a$io an on $& cai$al &M%i&m&n$ m&as%& /y $& Cai$al a&M%acy a$io as

0&ll. :& 'is$ &la$ionsi o+&s $& s$a$&m&n$ $a$ $& CEOs $a$ s&+& $&i 'is$ $&m a$

$is osi$ion a& /&$$& in imo+in /anQs &''ici&ncy $an $os& s&+in lon&, 0il& $&

la$$& on& $& s$a$&m&n$ $a$ $& CEOs 0i$ l&ss is$oy &coF in $& /an a& mo& a+&s&

$o0as $& is an $&&'o& 0o%l mana& $o ol la& o$ion o' $&i o$&n$ial 'o

l&nin. In $is cas&, $& yo$&sis canno$ /& &)&c$& an yo$&sis is &)&c$&. I$

can /& &Klain& /y $& 'ac$ $a$ $& CEO n&&s $im& $o l&an all o' $& &'&&nc&s an

oli$ics o' $& /an in o& $o imo+& is &cision-main a/ili$i&s $o0as /anQs is

mana&m&n$. In ai$ion $o $&s& 'inins, $& ass&ssm&n$ o' $is mo&l also &+&als a


18/24


!3

sini'ican$ an n&a$i+& &la$ionsi /&$0&&n $& na$ionali$y o' CEO an $& o'i$a/ili$y

m&as%& /y ROE. In o$& 0os, $& /ans 0i$ 'o&in CEO o no$ n&c&ssaily &'om

/&$$& &s%l$s in $& &$%n o' $& cai$al in+&s$& /y $&i o0n&s. :& analysis also

&mons$a$&s $a$ $& C&i$sHD&osi$s a$io as a sini'ican$ an n&a$i+& imac$ on $&

Cai$al a&M%acy a$io, imlyin $a$ a &%c& C&i$sHD&osi$s a$io is li&ly $o $i& an

inc&as& in $& o$ion o' l&nin o$&n$ial &l /y $& /an. oically, $& &%c& n%m/&

o' CDRA:IO o+o& /y $& &%c& amo%n$ o' mon&y in 'om o' c&i$s $o $& c%s$om&s

&s%l$s in inc&as& o' $& liM%ii$y ass&$s an $&&/y CAR. o $& imac$ o' $& o0n&si

/y $& CEO an $& s$a$%s o' a /an as a s%/siiay o an in&&n&n$ 'inancial ins$i$%$ion,

$& o/a/ili$i&s in $& analysis $o &ac o' $& &&n&n$ +aia/l&s so0 $a$ $&& is no

sini'icanc&.

Table 2C. Effects of the CEO qualities on bank performance

ROA ROE CIRATIO CARC -0.022575**

(0.016339)*

-0.050484***

(0.081246)**

1.516647***

(0.335307)**

0.431176***

(0.052103)**

CDRATIO 0.003358**

(0.017645)*

-0.005299***

(0.087741)**

-0.236314***

(0.362114)**

-0.262123***

(0.056269)**

CEO 0.005906**

(0.012555)*

-0.152681***

(0.062428)**

-0.102785***

(0.257645)**

0.007739***

(0.040035)**

CEOOWN 0.009195**

(0.011204)*

0.018504***

(0.055712)**

-0.092073***

(0.229926)**

0.002504***

(0.035728)**

CEOPOWER

BNATURE

0.027622**

(0.011243)*

-0.003174**

(0.009966)*

0.150764***

(0.055905)**

0.030742***

(0.049555)**

-0.532734***

(0.230724)**

0.079570***

(0.204516)**

-0.106066***

(0.035852)**

0.028610***

(0.031780)**

No. of observations

0.25

60

0.08

60

0.10

60

0.41

60



D&si$& o' $& 'inins an $& m&$ooloy %s& in $is s$%y, $& &s%l$s an $&

comm&n$s can s$ill /& /ias& /&ca%s& o' s&+&al limi$a$ions incl%inG mani%la$ion o'

'inancial s$a$&m&n$s, %n&+al%a$ion o' ass&$s, %s& o' mani%la$i+& olici&s $o &co&&cia$ion, ao$ion o' i''&&n$ m&$os $o consolia$& acco%n$s an o$&s8.

(eferences

,das1 (. and 6ehran1 &. 2##3F. Is cooa$& o+&nanc& i''&&n$ 'o /anin olin

comani&s. Economic policy re!ie#, !1F, 123-1"2.

,das1 (. and 6ehran1 &. 2#12F. Ban /oa s$%c$%& an &'omanc&G E+i&nc& 'o

la& /an olin comani&s.Fournal of financial intermediation, 212F, 2"3-27.

8

o mo& caac$&is$ics o' 'a%%l&n$ /&a+io, %n&$ical ac$ions an c&a$i+& acco%n$in in $&ms o's$a$&ic m&as%&s, s&& $& s$%y &a& /y Caa+a$y 1!8F.


19/24


!"

,nderson1 (.+.1 6ansi1 S. and (eeb1 ).6.2##"F. Boa caac$&is$ics, acco%n$in &o$

in$&i$y an $& cos$ o' &/$.Fournal of accounting and economics, 373F, 315-3"2.

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377.

#acon1 J.1!73F. Corporate directorship practice, member and committees of the board. N&0 oG

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#arnhart1 S.1 6arr1 6. and (osenstein1 S. 1!!"F. im &'omanc& an /oa comosi$ionG

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