Bank governance and performance: a survey of the literature

Fernandes, Catarina; Farinha, Jorge; Martins, Francisco Vitorino; Mateus, Cesário

doi:10.1057/s41261-017-0045-0

Cited by 44 publications

(33 citation statements)

References 175 publications

(293 reference statements)

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“…Only by establishing a sound operation mechanism of the board can it be truly effective. This also suggest that as the size of the board of directors expands, the agency problem becomes more prominent and the coordination and communication between the board members become more difficult , then the negative effect of the communication would exceed its positive effect (Fernandes et al, 2018).…”

Section: Main Analysis and Discussionmentioning

confidence: 99%

“…However, as the size of the board of directors expands, the agency problem becomes more and more prominent. When the number of board members exceeds the optimal range, the more time it takes for the coordination of the board members to ask, and the negative effect of the communication would exceed its positive effect (Fernandes et al, 2018). Mariappan and Thyagarajan (2018) found that board size was significantly related to performance when board size was between 6 and 9.…”

Section: Board Sizementioning

confidence: 99%

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Determinants of economic value added (EVA) in Chinese listed banks

Zhang

Aboud

2019

ARA

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Purpose The purpose of this paper is to examine the determinants of the EVA performance evaluation model for the Chinese banking industry. The authors investigate the impact of six bank-specific factors and corporate governance factors on financial performance. Design/methodology/approach The authors use the ordinary least square regression to examine the determinants of the EVA performance evaluation model for the Chinese banking industry. The findings are generally robust to alternative proxies of performance. Findings The empirical results indicate that credit risk, operational efficiency and the degree of innovation are positively related to banks’ EVA while capital management has a negative impact on it. In addition, although board size and independent directors are not related to the bank’s EVA, from the perspective of the traditional performance evaluation indicators, executive compensation has a positive impact on the bank’s profitability. Research limitations/implications This paper has some limitations. First, due to the large number of adjustments to accounting items are required in the application of EVA when evaluating business performance, some items of the EVA model in this paper have been simplified, which may cause the bank’s EVA value to deviate slightly from the actual situation. Moreover, the sample includes only listed banks, so our results cannot generalize to non-listed banks, such as some small- and medium-sized commercial banks. Originality/value This paper contributes to the limited body of literature concerning the use and the determinants of EVA in emerging markets. The authors construct an EVA model which is suitable for China’s banks and reports comprehensive evidence on the drivers of EVA as a measurement tool.

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Section: Main Analysis and Discussionmentioning

confidence: 99%

Section: Board Sizementioning

confidence: 99%

Determinants of economic value added (EVA) in Chinese listed banks

Zhang

Aboud

2019

ARA

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“…The literature supports using the following distinct measures of bank performance as summarized in Fernandes, Farinha, Martins, and Mateus's (2018) survey of literature: stock returns, Tobin's Q, ROE, ROA, accounting earnings, cost efficiency, profit efficiency, total interest plus noninterest expenses divided by assets, bank losses, non-performing assets, financial reactions based on CAMELS indicators, pre-tax operating income, net interest margin (NIM), return on average assets (ROAA), return on average equity (ROAE), loan losses, EBIT over total assets, likelihood to participate in bailout program, and amount of bailout funds. Additional research was conducted, and the literature supports the three most common measures of bank profitability: ROE, ROA, and NIM.…”

Section: Measuring Consequences On Profitability and Bank Performancementioning

confidence: 98%

CEO Succession Planning in Small Community Banks: A Qualitative Case Study of “PNW” Bank

2019

JAF

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The case study explores an effective, successful chief executive officer (CEO) succession at a small community bank. The outcome of CEO successor choice can have a substantial impact on the organization's strategy and success. Lack of an effective succession planning process presents a challenge for these banks that are thinly staffed and have aging CEOs and executives. The emergent themes and major findings were initial vision of candidate, intentional communication during transition, successor cultural fit, and trusting relationships. Other small community banks can use the major findings for succession planning to reduce the risk of negative or unintended consequences.

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“…They suggested that future research should consider additional variables such as board interlocks and directors' networks. Finally, Fernandes et al (2017a) concluded that lack of financial expertise on banks' boards could be a relevant factor in the 2007 financial crisis.…”

Section: Directors' Educational Level and Banks' Financial Performancementioning

confidence: 99%

Quality of Board Members’ Training and Bank Financial Performance: Evidence from Portugal

I.М.¹,

J.A.²

2018

IJEBA

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This study examines the impact of the quality of board members' training on the financial performance of Portuguese banks. The study employs a sample of 276 board members. Financial ratios such as return on average assets (ROAA) and return on average equity (ROAE) are used as measures for gauging banks' financial performance. Three indexes are used as proxies for board members' educational qualifications, specifically: Eduindex, for all academic qualifications obtained in areas such as business or economics; EduindexDP, for all qualifications obtained in prestigious domestic business schools; and EduindexFP, for all qualifications obtained in prestigious foreign business schools. The study findings have important policy implications, specifically a positive and significant impact on the bank's financial performance from having board members holding degrees from prestigious foreign business schools. In particular, the findings suggest that the prudential supervision developed by Banco de Portugal in cooperation with the European Central Bank should include a more rigorous process in the selection of board members. The present study is one of the first attempts in the literature emphasizing all these aspects simultaneously, that is, the banking sector, quality of board members' training, and Eduniversal Rankings, in the context in which all the banks of a specific country are analysed.

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Bank governance and performance: a survey of the literature

Cited by 44 publications

References 175 publications

Determinants of economic value added (EVA) in Chinese listed banks

Determinants of economic value added (EVA) in Chinese listed banks

CEO Succession Planning in Small Community Banks: A Qualitative Case Study of “PNW” Bank

Quality of Board Members’ Training and Bank Financial Performance: Evidence from Portugal

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