Performance and CEO duality in Indian public banks: a moderating role of board independence

Abstract

Purpose

The study aims to estimate the impact of the vigilant board independence (BIND) dimension that potentially neutralises the unfair influence of chief executive officer duality (CEODU) on Indian public banks' performance.

Design/methodology/approach

The study takes into account the fixed-effects model to investigate the potential moderating effect of BIND in the relationship between CEODU and Indian bank performance. The econometric model is also robust against heteroscedasticity, serial correlation and cross-section dependence issues to ensure that the model is free from such biases. The study also addresses the major issue of endogeneity via vector autoregression and performs the analysis by considering one period lag of the explanatory variables.

Findings

The findings demonstrate that CEODU does not always lead to a negative outcome on the performance until or unless the board is monitored by the effective presence of outside directors.

Research limitations/implications

The regulatory bodies consider the results to strengthen board capital where CEODU can benefit a business entity if vigilance BIND is present at or above a threshold point.

Originality/value

The study evaluated an under-researched role of BIND as a moderator that undermines the negative influence of CEODU on the performance of Indian banks. The study also establishes that the CEO's contribution to performance increases when the number of outside directors is at or above a certain threshold.

Citation

Singh, R.K. and Sharma, S.K. (2024), "Performance and CEO duality in Indian public banks: a moderating role of board independence", Journal of Accounting in Emerging Economies, Vol. 14 No. 2, pp. 253-272. https://doi.org/10.1108/JAEE-11-2022-0320