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23 Eur. J.L. & Econ. 1 (2007)

handle is hein.journals/eurjlwec23 and id is 1 raw text is: Eur J Law Econ (2007) 23:1-27 DOI 10.1007/s10657-007-9001-2 The effect of board size and composition on European bank performance Panagiotis K. Staikouras - Christos K. Staikouras Maria-Eleni K. Agoraki Published online: 15 May 2007 © Springer Science+Business Media, LLC 2007 Abstract Banks are special financial institutions generating distinct corporate governance challenges. The present paper examines the relationship between two of the most pertinent corporate governance factors-that is, the size of the Board of Directors and the proportion of non-executive directors-and firm performance on a sample of 58 large European banks over the period 2002-2004. The empirical analysis embraces a number of bank-specific variables. Our results reveal that bank profitability is negatively related to the size of the Board of Directors, while the impact of Board composition, although positive in all models, is, in most cases, insignificant. The results are robust after controlling for firm-specific variables. Keywords Corporate governance Bank performance Board size Board composition JEL Classification G21 G34 L25 K20 1 Introduction Over recent years, corporate governance has become a major and highly contentious issue in all advanced economies, as well as in developing countries. Spurred by a wave of corporate scandals mainly owed to self-dealing, fraud and poor quality management decision-making, corporate governance has attracted international attention as a means to address the separation of ownership and control (or agency) problem in public companies, thus promoting corporate efficiency. P. K. Staikouras (E) Department of Banking and Financial Management, University of Piraeus, 80 Karaoli & Dimitriou Street, 18534 Piraeus, Greece e-mail: pstaik@unipi.gr C. K. Staikouras - M.-E. K. Agoraki Department of Accounting and Finance, Athens University of Economics and Business, Athens, Greece 4_ Springer