Bank Board Network and Financial Stability in Emerging Markets
46 Pages Posted: 23 Jan 2021
Date Written: October 16, 2020
This study analyzes the relation between board network and financial stability of banks in India. We find that a larger board network is related to improvements in financial stability given by asset quality, insolvency risk, and volatility of profits. Further, the board network is more critical for the private sector banks in India. Our findings support the integrated resource dependence view of the board where well-connected boards are better able to monitor the management and provide strategic advice necessary to reduce risk. Unlike for non-financial firms, restricting the number of directorial positions for bank directors may not have any desirable effect on bank outcomes.
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