TITLE

LEADERS VS. LAGGARDS: A STUDY OF THE RELATIONSHIP BETWEEN SELECTED BOARD COMPOSITION CHARACTERISTICS AND SELECTED BANKING PERFORMANCE MEASURES

AUTHOR(S)
JURAS, PAUL E.; HINSON, YVONNE L.
PUB. DATE
July 2008
SOURCE
Advances in Accounting, Finance & Economics;2008, Vol. 1 Issue 1, p1
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Owners, regulators, and institutional investors have been calling for reform in the corporate boardroom. Some of the suggested changes include increasing the proportion of outside directors serving on boards and requiring equity investments on the part of directors. Prior research on relationships between various board characteristics and corporate performance provides mixed results, but many of these studies covered a range of industries. By studying a single industry, we attempt to overcome the inherent problems of cross-industry studies. This research is a study of commercial banking, to determine if there are fundamental differences in selected board characteristics of the industry's highperformers and under-performers. Drawing from our data set of over 250 firms, we identify 20 "leaders" and 20 "laggards" based on various accounting-based measures of corporate performance: NIM, efficiency, ROA, and ROE. We then examine several board characteristics drawn from the literature (board size, proportion of outside board member, average percentage equity ownership of directors, and board tenure) to see whether differences in these characteristics exist between leaders and laggards. Using a test of means, we find that only various measures of equity ownership were significantly different between the leaders and laggards. The results of this analysis can provide a basis for supporting or opposing various corporate governance reforms within the banking industry. Since commercial banking is a regulated industry, there are also potential public policy implications to this study.
ACCESSION #
37244845

 

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