Banking Sector of Pakistan: Impact of Board of Directors’ Size on Performance

Abstract

The main objective of this study is to examine the relationship between the Board of Directors’ size and the bank’s performance. Independent variables like Board ownership, Board size, Yearly Board Meetings, Yearly Audit Committee meetings, CEO Ownership, CEO Tenure, Executive Ownership, and Role Duality whereas Return on Assets as a dependent variable are used to measure this relationship. This study uses the data of 32 banks listed in the Pakistan Stock Exchange between the period 2002-2018. To examine the impact statistically, PLS Regression Random Effect Model is used due to higher significance and t-statistics values after exploring both Fixed and random effect models through the Housman test. Results show that board meetings and shares held by the CEO have a negative but significant association with banks’ performance. Audit committee meetings and a total number of board of directors have a significant and positive association with the performance of the bank. CEO Tenure, duality, shares held by the executive director, and shares held by the board of directors have a positive but non-significant association with banks' performance. Study variables explain variation in performance by 55.34%.