Board characteristics and banks profitability: empirical evidence from India

Abstract

The present paper seeks to examine the association between board characteristics and banks profitability. The study is based on convenience sampling of 10 Indian banks for the period from 2010 to 2019. Banks profitability is measured by return on assets, return on capital employed, profit after tax and return on net worth, while board of directors’ characteristics is measured by board of directors’ size, board of directors’ composition, board of directors’ diligence, board executive directors and board promoters. The study is used leverage, size, and liquidity as controlling variables. Fixed and random effects models are used for analyzing the data. The findings revealed that Total board size positively and significantly impacts return on assets, Return on capital employed, Profit after detecting tax and Return on net worth, while percentage of promoter negatively and insignificant impacts return on assets, Return on capital employed, profit after detecting tax and Return on net worth. The present study contributes to the existing literature by examining the impact of board characteristics which includes board promoters and executive directors on Indian banks profitability.