Research On Dynamic Endogenous Relationship Between Commercial Bank Board Structure And Performance

Since the1990s the spread of the financial crisis throughout the world, the society began to pay more and more attention to the management of banks due to the collapse of major banks and the frequently mergers and reconstruction of banking sectors. On the other hand, the banking is facing new emerging challenges associated with their own operation and development mode in response to the financial crisis. As a result, based upon the improvement of the governance mechanisms, the Board of Directors of the Bank importance of governance have become increasingly prominent.However, to set up an efficient board of directors of the bank structure is not an easy issue, especially it is hard to reach a census between the size and independence of the bank’s board of directors and the performance of the corporates, a very important reason is that many scholars ignore the endogenous characteristics of the Board. Generally speaking, the board characteristics influence the company’s performance but also they are affected by the performance of the company and vice versa. Based on existing research findings and theory of governance, this report proposed the concepts of board structure’s dynamic nature, and we applied this theory to China’s banking industry. We concluded that there exists a lag cause-effect factors between the bank board structure (size and independence) and bank performance.In this report we selected14listed banks in China as research samples, and applied the cross-lagged model with two-way interaction by using the data sets of2008-2012as panel data. Then we tested the dynamic nature problems by analyzing the stable and random factors. The study found that the two-way lag effects do play an important role in influencing the board structure (size and independence of China’s listed banks) and bank performance, as well as the dynamic nature. Firstly, the correlation relationship of Board of Directors of the Bank structure (including board size and independence of the board) and the performance of the banking company is not displayed in current period, but there is a certain lag. It is mainly because of bank performance is regularly published, the Board of Directors construction usually don’t alter in a short period of time, thus the two are not strictly continuous; In addition, the Bank Board of Directors of the pre-scale, pre-independence of the board have a negative impact on bank performance in the current period mainly due to it is driven by the Board optimal scale and policy; In addition, pre-bank performance scale on the current board of directors had no significant effect, which can be explained by the optimal size of the Board;, pre-bank performance has no significant effect on the independence of the current Board of Directors, and this is mainly because the efforts to reverse the enterprise Performance downward trend as a balanced outcome of the game, there will be more independent directors enter into the Board to strengthen the supervision of the operators.In this report, we deeply explore the board management issues of Chinese listed banks from the dynamic endogenous perspective. Based on the empirical analysis, we argued the efficiency and existence of the endogenous problems in China’s listed banks. In summary, it would has a positive reference and guide meaning for improving the governance mechanisms of the Board of Directors of China’s banking market both theatrically and practically.