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The purpose of this study is to examine whether independent directors' financial expertise affects the use of private information in setting bank chief executive officer (CEO) bonuses.

The association between future firm performance and bank CEO bonuses is used to measure the incorporation of private information into bonuses. Both level and change specifications are employed to test the effect of independent directors' financial expertise on the use of private information in setting CEO bonuses.

It is found that future firm performance is more positively associated with bank CEO bonuses for banks with a higher proportion of financial experts among independent directors than for other banks. The findings suggest that independent directors with financial expertise can more effectively use private information in setting bank CEO bonuses.

Research on independent directors' role in the use of private information in setting compensation is valuable for understanding how corporate governance can enhance the efficiency of CEO compensation contracts. This study indicates that financial experts on the bank board play an important role in this regard.

This paper aims to examine how the diversity of educational levels within bank boards influences the efficiency and stability of banks operating in the Middle East and North Africa (MENA) region. Unlike previous studies, this analysis also investigates the role of board gender diversity in moderating the relationship between board educational level diversity and bank efficiency and financial stability in MENA.

In this study, a sample of 77 banks in the MENA region spanning the years 2011 to 2018 is used. The relationship between the presence of highly educated directors on the board, bank efficiency and stability is assessed using the ordinary least squares method. Additionally, the authors use the Generalized Method of Moments technique to correct endogeneity problem.

This study establishes a positive association between the presence of directors with advanced educational backgrounds on bank boards and bank efficiency and stability. Furthermore, the inclusion of women on the board strengthens this relationship.

These findings have important implications for policymakers and regulators in the MENA region, suggesting that promoting diversity policies that encourage the participation of highly educated directors on bank boards can contribute to enhanced efficiency and financial stability. Policymakers may also consider implementing quotas or guidelines to improve gender diversity in board appointments, thereby fostering bank performance in the region.

This study stands out for its innovation and distinctiveness, as it delves into the connection between board educational level diversity and bank efficiency in the MENA region. Notably, it surpasses previous research by investigating the moderating role of board gender diversity, thus offering valuable insights into the complex interplay between these two facets of board diversity. This contribution enriches the existing literature by providing novel perspectives on board composition dynamics and its influence on bank efficiency and stability.

The purpose of this paper is to apply theoretical concepts of corporate and bank boards to the Boards of Directors at Federal Reserve Banks and at US Basel II A‐IRB adopters. The Basel II Accord set to take effect in the USA in 2009 provides direction as to board oversight in Pillar 2. Since the Federal Reserve is one agency responsible for this document, the paper proposes to investigate the governance structure at US banks, presumably adopting (or opting in) the Basel II A‐IRB framework.

The board structure at Federal Reserve District Banks as of 2006 is examined. Also analyzed are the board structure, executive compensation, and ownership structure at the 22 banks identified as Basel II A‐IRB adopters. These results are then compared with current views and standards of “good governance” in the literature.

It was found that there is a fairly diverse representation on the board (in terms of female directors), a large proportion of directors are CEOs (generally of other banks), and that boards comprised a majority of outside directors. Several governance characteristics are contrary to “good governance” characteristics described in the literature. Further, banks adopting A‐IRB procedures in Basel II may need to improve governance structures to be in compliance with Pillar 2 of Basel II.

The Federal Reserve System, in an effort to increase board oversight as part of a risk management framework, should also consider its own board structure in light of current research on private‐sector boards. Both Federal Reserve District Boards and Basel II Boards should work towards exemplary corporate governance in light of their place in the US banking system.

The paper investigates the governance structures of banks.

This paper aims to clarify whether assurance on non-financial corporate social responsibility (CSR) reports impacts the perceptions and decisions of banks as capital providers. The authors investigate the effects of the type of assurance provider and the level of assurance provided on decisions by banks to grant credit, make their own personal investments or recommend share purchases to their customers. The study aims to expand the domain of assurance on CSR reports (CSRR) by taking up a call by Cohen and Simnett (2015), who ask for behavioral research on how non-financial report’s intended users interpret and react to assurance.

The paper is based on an experiment case on a fictitious company with a 2 × 2 + 1 between-subjects design. To overcome concerns regarding external validity and to prove results in a real-world setting, the authors selected German bank directors as subjects due to the extremely high relevance of banks to the German economy. The authors investigated the perceptions of 69 bank directors and analyzed the influence of CSR assurance on their decisions.

The findings suggest that assurance positively influences confidence in CSRR and that, consequently, bankers are more likely to make favorable decisions toward the reporting companies, such as approving applications for credit, investing themselves in the company or recommending the purchase of shares to their clients. These effects are stronger when an accounting firm provides the assurance and when the assurance level is reasonable rather than limited.

The arguments presented are, strictly speaking, limited to the case in the experiment and the views held by the bank directors at the time the authors sent out the questionnaires. Moreover, the cell sizes are quite small. Nevertheless, the authors were able to find highly significant results.

The main implication of the paper is that the purchase of CSRR assurance services has a positive effect on bank directors’ perceptions and decisions. They favor the provision of such services by accounting firms and they prefer a reasonable assurance level. Thus, it can be concluded that bank directors perceive quality differences between assurance providers, are able to recognize the difference between reasonable and limited assurance and that the related information is relevant for their decisions.

This paper fulfils an identified need to study the influence of CSRR assurance on decisions by bank directors. The observation of a high decisions-usefulness of CSRR assurance suggests that regulators should consider mandating some form of assurance on non-financial reports throughout the EU member states.

This study aims to examine the impact of an increasing board diversity on the performance of Italian listed banks for the period 2008–2014, taking into account the effects of the implementation of gender quota laws in Italy. The study also investigates the effects of this potential relationship during the crisis that Italy had to cope with since 2011, as well as the potential impact of female directors and their roles on bank boards.

To verify this relationship, the study uses a panel sample of 22 listed banks and applies fixed effects with the Driscoll-Kraay error. Considering the shareholders’ perspective, bank performance (BP) is measured by return on average equity. The robustness of results is verified through return on average assets, Tobin’s Q (a market measure from investors/stakeholders’ perspective) and an alternate estimation model, i.e. GMM.

The findings highlight a positive relationship between the performance accounting measures and gender diversity, a non-neutral impact of the presence of female directors on boards and a significant and negative effect on market measures.

The results of the study, as far as accounting measures are concerned, support managerial and legislative efforts toward more gender-balanced boards and the appointment of female directors in executive or independent roles. As per market measures, the results suggest that the presence of women on boards should be considered advantageous in terms of value, so that the market can finally appreciate diverse bank boards.

First, previous studies did not provide exhaustive results to document the proposed relationship and did not examine this relationship during a financial crisis. Second, the role of female directors on boards is also taken into account. Third, the study highlighted that BP is a multi-dimensional construct, with accounting and market metrics being its distinct dimensions.

Directors play a hard-to-quantify but critical role in the success of corporations. Outside directors supplement the firm-specific knowledge of inside directors by providing expertise and monitoring. Prior research finds that outside directors who are commercial bankers can be both beneficial and costly to large, non-financial corporations. Smaller, bank-dependent corporations should benefit more than large firms from the services banker directors provide, but may also be more prone to the costs they can impose. The purpose of this paper is to investigate the influence of bank dependency on appointments of banker directors.

The author estimates models relating the probability of a first-time banker-director appointment to proxies of bank dependency on data for a matched sample of firms with and without banker directors drawn from a size-representative sample of Compustat firms.

Bank-dependent firms are less likely to appoint bankers as directors than bank-independent firms. Bank-dependent firms are also less likely to appoint bankers whose employers are firms’ creditors (i.e. affiliated bankers). Bank-dependent and bank-independent firms are indistinguishable in their probabilities of appointing unaffiliated bankers as directors.

Bank-dependent firms with unexploited growth opportunities appear unable to ameliorate their financial constraints by having banker directors. Appointing retired bankers to boards may give firms the benefits of banker directors without the costs.

This paper is the first to: document the prevalence of banker directors at smaller corporations; present econometric evidence on banker-director appointments at firms ranging from small to large; and identify bank dependency as a factor limiting appointments of affiliated banker directors.

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.

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.

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

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.

The purpose of this paper is to examine the Board of Directors’ characteristics and their impact on the financial soundness of Islamic banks.

Regression analysis is applied to test the impact of the Board of Directors’ characteristics on the financial soundness of Islamic banks, using a panel data set of 67 Islamic banks covering 20 countries from 2005 to 2018. The Z-score indicator is used to evaluate the Islamic banks’ soundness. To check the robustness of the results, this paper uses other dependent variables (CAMEL) than the Z-score.

The main results show that the presence of an independent non-executive director negatively impacts the financial soundness of Islamic banks, while the chief executive officer duality practice has a positive effect on it. Other characteristics of the Board of Directors do not significantly impact the financial soundness of Islamic banks (foreign director, institutional director, chairman with a Shari’ah degree, interlocked chairman and the Board of Directors’ size).

This study aims to fill the gaps in the literature that discuss the Board of Directors’ role in corporate governance and its impact on the financial soundness of Islamic banks. In other words, it shows the role played by the Board of Directors and improves the knowledge of the corporate governance-financial soundness relationship. Plus, managers, investors and regulators may gain evocative insights, particularly those looking to improve their Islamic banks’ soundness by restructuring their boards’ composition.

This study sheds new light on the literature on Islamic banking by clarifying the relationship between the Board of Directors and the financial soundness of Islamic banks. Contrary to previous research, this paper uses an additional hypothesis stating that a chairman with a Shari’ah degree (Fiqh Muamalt) has a positive impact on the financial soundness of Islamic banks.

This paper aims to examine whether board-related characteristics matter for cost efficiency in banking sector.

This study uses a sample of publicly traded US commercial banks and savings institutions to estimate a relationship between cost efficiency measured by stochastic frontier analysis and a set of board-related characteristics for the period 2007-2013.

An inverted U-shape relation is found between board size and efficiency. Thus, there is a trade-off between costs and benefits of larger boards. Optimal board size is higher for banks with more complex operations. This study also observed an inverted U-shape relation between board independence and cost efficiency. The banks where the Chairman also executes the CEO responsibility show lower efficiency. However, a higher proportion of independent board members in banks with unitary leadership structure may mitigate the conflict of interest and lower efficiency stemming from CEO duality.

This study’s evidence supports the Basel Committee on Banking Supervision emphasis on advising a board composition that provides for a sufficient degree of director independence.

The results are relevant for banks and their external and internal stakeholders. Banks may adjust their current board characteristics to increase the board effectiveness. Externally, potential investors can evaluate the quality of corporate governance of banks before making investment decisions. The empirical findings can also be useful for regulators imposing corporate governance codes in banking.

To the best of the authors’ knowledge, this is the first paper to provide empirical evidence on the impact of board characteristics on bank efficiency for a wide panel of US banks. Additionally, a comprehensive set of board-related variables is used.

This paper aims to analyze the relationship between bank institutional setting and risk-taking by exploring whether board education and turnover are drivers of the risk propensity of cooperative banks compared to joint-stock banks.

Based on a comprehensive data set of Italian banks over the 2011-2017 period, this paper examines whether these board characteristics affect the risk propensity of cooperative and joint-stock banks. Bank risk is measured by the Z-index, profit volatility and the ratio of non-performing loans to total gross loans.

The findings show that cooperatives take less risk than joint-stock banks and have lower board turnover and education. Furthermore, this study finds that while board education mediates the relationship between the cooperative model and bank risk-taking, there is no evidence for board turnover. Thus, the lower educational level of cooperative directors contributes to explaining the lower risk-taking of cooperative banks.

The findings have several implications. In terms of the more general policy debate, the results point to the need to strengthen the governance model for both joint-stock and cooperative banks while supporting the view that a more ad hoc perspective on the best models and practices for each type of institutional setting would be preferable. In particular, the study reveals how board education’s effects on bank risk-taking should be carefully monitored.

Through a mediation framework, this study provides empirical evidence on the relationship between bank institutional setting (by distinguishing between cooperative and joint-stock banks) and risk-taking behavior by exploring the underlying mechanisms at the board level, which is novel in the literature.