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Board independence and Chinese banking efficiency: a moderating role of ownership restructuring

Board independence and Chinese banking efficiency: a moderating role of ownership restructuring This study investigates how Chinese banking sector reforms have affected the relationship between banking performance and bank board structure. The study analyzes data from listed commercial Chinese banks between 2000 and 2013, and banking efficiency scores are estimated using the stochastic frontier approach (SFA) and data envelopment analysis (DEA). The impact of board structure and structural reforms on banking efficiency is further analyzed using panel data regression. We find that board independence has a negative influence on banking efficiency, but it becomes positive when the banks are listed on the stock market. This finding confirms the soft-budget constraint theory, which holds that large banks are less efficient than smaller ones as the former can more easily obtain financial support during times of distress. Further, the listing of state-owned banks positively moderates the relationship between board independence and banking efficiency. The study contributes to the literature on banking reforms, board structure, and banking efficiency. It confirms the theoretical basis for Chinese banking reforms and that banking efficiency has improved since the ownership restructuring. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Eurasian Business Review Springer Journals

Board independence and Chinese banking efficiency: a moderating role of ownership restructuring

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References (102)

Publisher
Springer Journals
Copyright
Copyright © Eurasia Business and Economics Society 2020
ISSN
1309-4297
eISSN
2147-4281
DOI
10.1007/s40821-020-00155-9
Publisher site
See Article on Publisher Site

Abstract

This study investigates how Chinese banking sector reforms have affected the relationship between banking performance and bank board structure. The study analyzes data from listed commercial Chinese banks between 2000 and 2013, and banking efficiency scores are estimated using the stochastic frontier approach (SFA) and data envelopment analysis (DEA). The impact of board structure and structural reforms on banking efficiency is further analyzed using panel data regression. We find that board independence has a negative influence on banking efficiency, but it becomes positive when the banks are listed on the stock market. This finding confirms the soft-budget constraint theory, which holds that large banks are less efficient than smaller ones as the former can more easily obtain financial support during times of distress. Further, the listing of state-owned banks positively moderates the relationship between board independence and banking efficiency. The study contributes to the literature on banking reforms, board structure, and banking efficiency. It confirms the theoretical basis for Chinese banking reforms and that banking efficiency has improved since the ownership restructuring.

Journal

Eurasian Business Review – Springer Journals

Published: Feb 27, 2020

Keywords: Banking reforms; China bank performance; DEA; SFA; Banking efficiency; Board independence; G20; G21; G38; D61

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