Sitting on the Fence: Does Having a ‘Dual-Director’ Add to Bank Profitability?

Abstract

This paper investigates how combining positions between the board of directors and top-management affects bank profitability. We use 2010 bank-level data from 112 countries. Our results suggest that combining positions reduces both ROE and ROA of banks. However, for banks in developing countries, the influence proves to be positive. We also show that the higher the proportion of the board members who simultaneously hold a managerial position, the lower the profitability of the bank. This effect is observed both for developed and developing countries.

Keywords: corporate governance, banks, profitability

JEL Classification: G21, G34