Board structures and performance in the banking industry: Evidence from Japan

• Published in: International review of economics & finance Vol. 56; pp. 308 - 320
• Main Authors: Sakawa, Hideaki, Watanabel, Naoki
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.07.2018
• Subjects: Banking and finance; Board of directors; Corporate governance; Japan; Corporate governance; Japan; G21; G34; L21; Banking and finance; Board of directors
• ISSN: 1059-0560; 1873-8036
• DOI: 10.1016/j.iref.2017.11.001

This paper presents an examination of the relation between board size and composition and firm performance for the Japanese banking industry during 2006–2011. Our results for the banking industry show that the advisory and monitoring roles of larger boards and outside directors are ineffective. Results also show that banks which received taxpayer funds cannot reform their board structure and that taxpayer funds do not strengthen the advisory role of outside directors. We conclude that Japanese bank boards have not performed well during recent periods and that taxpayer funds have tended to rescue banks with weaker governance. •This paper describes investigation of bank board roles in Japan during 2006–2011.•Results show that bank board size is negatively related to bank performance.•Moreover, outside directors of banks do not contribute to higher performance.•Taxpayer funds were used to bail out banks with weaker governance.•Large bank boards and outside directors are ineffective advisors and monitors.