Board structure and financial performance: Evidence from Chinese listed banks

In this study, we extend earlier studies to explore the impact of board structure characteristics on bank performance in a Chinese context. Prior studies show that effective corporate governance could significantly improve the efficiency of monitoring and supervising. While most of prior studies focus on the non-financial firms, bank boards are somewhat different from boards of non-financial firms because of the characteristics in bank lending behaviors. We try to collect the extensive and updated time series of data on bank governance in China. Thus, this paper displays a more comprehensive picture of the board structure characteristic and its impacts on the Chinese banking system by analyzing Chinese listed commercial banks from 2001 to 2016. As the results of analyses, we find that the board size has a significant and positive relationship with bank performance. Further, board independence has the positive effects on financial performance(ROA, ROE) and the negative effects on market performance(Tobin’s Q). However, we find that the number of board meetings has no relationship with both financial and market performances. Our findings indicate that Chinese listed banks could increase their board size to improve financial performance. Moreover, investors in the China capital market seem to recognize that board independence is not properly functioning for the governance system. The results of this paper implies that managers of a bank could adopt a specific strategy to achieve an optimal board structure to enhance bank performance in China.