Bank Performance and Risk-Taking – Does Directors’ Busyness Matter?

38 Pages Posted: 21 Jan 2016 Last revised: 24 Apr 2017

See all articles by Shawgat Kutubi

Shawgat Kutubi

La Trobe Univeristy

Kamran Ahmed

La Trobe Business School, La Trobe University

Hayat Khan

La Trobe University; Financial Research Network (FIRN)

Date Written: January 21, 2016

Abstract

This paper extends the literature on busyness of directors (board) and bank performance on emerging markets. We argue that a quadratic model parsimoniously captures the tension between the ‘reputation hypothesis’ and ‘over-boarding hypothesis. We find a robust inverted u-shaped relationship between inside directors’ busyness. Independent directors’ busyness on the other hand does not have any impact on performance. We calculate the optimal level of busyness. The inverted u-shaped relationship shows that the reputation hypothesis dominates the over-boarding hypothesis at less than the optimal level of busyness and vice versa. This allows us to reconcile the mixed evidence in the literature on busyness and performance. We also find some evidence that inside directors’ busyness reduces risk whereas independent directors’ busyness increases risk.

Keywords: Busy Directors, Independent Directors, Inside Directors, Bank Performance and Risk, Emerging Markets

Suggested Citation

Kutubi, Shawgat and Ahmed, Kamran and Khan, Hayat, Bank Performance and Risk-Taking – Does Directors’ Busyness Matter? (January 21, 2016). Available at SSRN: https://ssrn.com/abstract=2719440 or http://dx.doi.org/10.2139/ssrn.2719440

Shawgat Kutubi (Contact Author)

La Trobe Univeristy ( email )

Department of Economics and Finance
Plenty Road & Kingsbury Drive
Melbourne, 3086
Australia
+61470694668 (Phone)

Kamran Ahmed

La Trobe Business School, La Trobe University ( email )

Kingsbury Drive
Melbourne, VIC 3086
Australia
0403038387 (Phone)
3105 (Fax)

Hayat Khan

La Trobe University ( email )

Department of Economics and Finance
Victoria 3552, 3086
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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