Influence of independent directors on the market risks of Indian banks

Abstract

Purpose

The purpose of this paper is to empirically explore the influence of independent directors (non-executive directors) on the market risks of the Indian banks.

Design/methodology/approach

This paper is based on the data collected over a period of seven years (2009-2016) for a set of 29 Indian banks that are the constituents of the National Stock Exchange 500 Index. The data for independent directors of the sample banks are extracted from the annual reports of the banks, whereas the data relating to the dependent and control variables are compiled from the Ace equity and the Reserve Bank of India databases. The study uses the panel data method for analysis of the collected data for the sample banks.

Findings

This study concludes that independent directors increase the market risks for Indian banks (measured through equity beta).

Originality/value

This is, perhaps, the first paper to look into the impact of independent directors on the market risks of Indian banks. The policymakers and banks may need to be aware of the risk implications of the findings of the study in the Indian context, such that the independent directors enable their banks in reducing the market risks.

Citation

Shukla, A., Narayanasamy, S., Ayyalusamy, K. and Pandya, S.K. (2020), "Influence of independent directors on the market risks of Indian banks", Journal of Asia Business Studies, Vol. 15 No. 1, pp. 31-49. https://doi.org/10.1108/JABS-01-2020-0010