Do Board Characteristics Impact the Market Performance of Indian Banks?

Abstract

This paper explores the role of board characteristics of Indian banks on their market performance. We conducted panel data analysis on a sample of 29 Indian banks that form part of the National Stock Exchange (NSE) 500 index (covering a period of 8 years from 2009-2016). While ten board characteristics were considered as independent variables, Tobin’s Q was considered as the dependent variable (Tobin’s Q was assumed to be a proxy for market performance of banks). Findings suggest that only three out of ten board characteristics (average number of boards served, CEO duality and number of meetings conducted) positively affect market performance of Indian banks. Our sample included 29 Indian banks covering a period of 8 years. Also, other corporate governance mechanisms, such as characteristics of audit committee, stakeholder relations committee, nomination and remuneration committee and risk management committee were not considered for the study. Hence caution must be taken in generalizing the results of the study.