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Bank
CEO characteristics and bank performance
performance: evidence from India
Neeraj Gupta and Jitendra Mahakud
Jaipuria Institute of Management, Indore, India

Received 31 March 2019

Abstract Revised 27 January 2020
Purpose – The purpose of this study is to examine the impact of chief executive officer (CEO) personal 19 March 2020
characteristics on the performance of Indian commercial banks. Additionally, it also analyses the nonlinear 6 May 2020
13 June 2020
relationship of CEO age and CEO tenure on the bank performance. Accepted 28 June 2020
Design/methodology/approach – A balanced panel data approach has been used in this study.
Particularly, the fixed effect estimation technique is used to examine the relationship between CEO
characteristics and bank performance during the period 2009–2010 to 2016–2017.
Findings – The authors find that professional qualification of CEOs in finance stream enhances
performance. Additionally, the impact of CEO duality is found to be positive and significant on performance.
Male CEOs are beneficial for bank performance. Well experienced CEOs contribute to higher performance.
The results are robust across the various proxies of bank performance, and sub-samples based on ownership,
size of the bank and board size.
Practical implications – This study provides insights to policy regulators and policymakers who are
entrusted with the appointment of the CEOs in the banks in the light of the ongoing regulatory reforms.
Originality/value – This study can be considered as one of the early studies, which examines the
association between CEO characteristics and bank performance from an emerging economy perspective. It
also extends the existing study by considering both public and private banks operating in India.
Keywords Bank performance, CEO characteristics, CEO duality, Public sector bank,
Private sector bank, Board size
Paper type Research paper

1. Introduction
Effective leadership in terms of competent chief executive officer (CEO) is considered to be
important for the survival of the organization (Tichy and Devanna, 1986), and CEO is one of
the most influential employees of the organization (Hambrick, 1991; Hosmer, 1982). The
agency theory postulates the divergent interests of shareholders and the management
trustees who are entrusted with the management of affairs of the business (Fama and
Jensen, 1983), whereas the stewardship theory expects managers to be trustworthy and
responsible trustees of the organizational assets for intrinsic satisfaction, challenging
endeavors, exercise daily assigned duties and responsibilities to achieve appreciation from
peers and higher authorities (Donaldson and Davis, 1991). Additionally, the resource
dependency theory claims that directors are hired on the basis of explicit skills and
professional experience (Terjesen and Singh, 2009; Jackling and Johl, 2009). The studies on
behavioral finance theories have also contended that executives are not completely rational
in decision making and suffer from some psychological biases (Baker and Wurgler, 2013;
Fairchild, 2005). The intrinsic cognitive biases of executives may be due to preferences or
misguided ideas (Ritter, 2003). Upper echelons theory suggests that firms are the mirror
reflection of apex management, and their performance is significantly influenced by the
Managerial Auditing Journal
morals and quality of decision-makers (Hambrick and Mason, 1984). © Emerald Publishing Limited
0268-6902
DOI 10.1108/MAJ-03-2019-2224
MAJ Existing research suggests that the explicit personal characteristics of CEOs may affect
their behaviour and decision-making process which, ultimately, influence the performance
of firms (Jensen and Meckling, 1976). Widely, the extant studies have assessed the
association between CEO features and firm performance and have revealed that there are
certain features such as executive’s age, experience, power, tenure and others that may
impact the decision-making ability and thus performance (Bertrand and Schoar, 2003;
Bhagat and Bolton, 2008; Kim et al., 2009). However, some researchers have also argued that
the role of leadership is immaterial for organizational performance (Hall, 1977; Galbraith,
1984), indicating that the firm performance may also depend on the company-specific,
industry-specific and other macro-economic indicators (Kimberly and Evanisko, 1981;
Aldrich, 1979). Lieberson and O’Connor (1972) opined the insignificance of managers and
reveal that CEO effects add small explanatory power to firm performance (Finkelstein and
Hambrick, 1996). Considering the propositions of the various finance and corporate
governance theories, we try to assess the role of various CEO traits on the financial
performance of commercial banks operating in India.
As far as the research gap and relevance of this issue is concerned, the present study
provides evidence on the significance of CEO characteristics on Indian banks’ performance.
There are several reasons that motivate us to choose Indian banks to be an appropriate case
for study. First, our study has concentrated on the public and private sector banks which
have rarely been considered in the previous studies in the light of the ongoing regulatory
reforms. Second, the mode of selection of CEOs in private and public sector banks in India is
different. The Central Government appoints the CEOs of the public sector banks on the
advice of Banks Board Bureau [1] after discussing with Reserve Bank of India (RBI),
whereas the CEOs of the private banks are appointed by the board of directors. The private
sector banks have more autonomy in appointing the CEOs. This provides an opportunity to
analyze whether the difference in the mode of selection of CEO in the banks across different
ownerships bear any impact on the CEO characteristics and thus on the banks’ performance.
Third, RBI has capped the maximum age for Managing Director/CEO or executive directors
at 70 years in the private banks. However, the bank boards are free to prescribe lower
retirement age as an internal policy. In public sector banks, the maximum age for the
retirement of the CEO is 60. The minimum age for the appointment of CEO has been fixed at
21 years by the Indian Companies Act, 2013. The tenure of the CEO is not fixed. At present,
only the State Bank of India CEO, the country’s largest lender by assets, has a fixed tenure
of three years. With lower retirement age, the tenure of the CEO in public sector banks is
short (mean = 1.57 years), owing to which they face pressure to perform extraordinarily by
implementing plans in a hurry. While in private sector banks, the tenure of the CEOs is long
(mean = 5.52 years), which provides stability and is reflected in their performance. Fourth,
the ownership structure of Indian banks is different. In public sector banks, the Central
Government has a stake of more than 50% and hence the government interference is more in
public sector banks, whereas the private sector banks are in the hands of private
entrepreneurs and the general public.
The dissimilarity in the market structure and mode of appointment and retirement age of
the CEOs across different ownerships makes the Indian banks an out of sample evidence
and motivates us to study the role of the effectiveness of CEO characteristics in the Indian
banks’ performance. Using a sample of 36 banks operating in the Indian banking sector
from 2009–2010 to 2016–2017, we found that the professional education of the CEO in
financial stream enhances the performance of Indian banks. CEO duality is beneficial for the
banks. Male CEOs contribute to the higher performance in the Indian banks. We
make several contributions to the literature. First, most of the earlier studies (Peni, 2014;
Vintila et al., 2015) have been conducted in developed countries. Additionally, the existing Bank
studies in the Indian context regarding the impact of CEO traits focus on non-banking performance
organizations (Kaur and Singh, 2019). Hence, we try to assess the role of various CEO
attributes in a bank-based economy such as India where the banking system is different in
ownership, shareholding pattern, ownership concentration, board structure and mode of
selection of directors. This has rarely been discussed in the earlier literature. Second, most of
the earlier studies have studied the role of various CEO characteristics such as age, gender,
tenure, CEO-duality, busyness and others. This study additionally analyses the impact of
CEO total career experience and the CEO having prior experience as CEO on the Indian
banks’ performance. Further, we also analyze the curvilinear relationship of CEO’s age and
CEO’s tenure with bank performance. For checking the robustness of the results, we
analyzed these results by classifying the banks on the basis of various characteristics such
as ownership, bank capitalization and board size. We find similar results after conducting
the robustness test by estimating the purposed model through the generalized method of
moments (GMM) technique. These results estimated from the GMM technique are consistent
in the presence of any pattern of heteroscedasticity and autocorrelation (Arellano and Bover,
1995; Blundell and Bond, 1998). The application of GMM takes care of the problem of
heterogeneity by taking the first differences and thereby eliminating the individual effect,
which makes the results unbiased. The GMM estimation also addresses the issue of
endogeneity. In particular, the estimation process includes the lagged explanatory variables
as instruments, which allows for additional instruments by taking advantage of the
conditions of orthogonality existing between the lags in the independent variables of the
model (Arellano and Bond, 1991). We conclude that various CEO characteristics bear a
significant relationship with bank performance.
The rest of the paper is structured as follows. Section 2 presents the legal framework
regarding CEOs in India. Section 3 examines the review of literature related to various CEO
characteristics (such as age, tenure, financial expertise and its impact on bank performance.
Section 4 describes the data and research methods used. Findings and analysis are
presented in Section 5, whereas summary and conclusion of the study are presented in
Section 6.

2. Regulatory framework regarding chief executive officer in India

The Indian banking sector consists of public and private sector banks in India. The
ownership structure of public and private sector banks in India is different. In public sector
banks, the central government’s stake is more than 50%, whereas the Reserve Bank of India
has prescribed the diversified shareholding in private sector banks by a single entity/
corporate entity/group of related entities. Prior approval from the Reserve Bank of India is
required for acquiring the shareholding or voting rights of more than 5% in banks. The ‘fit
and proper’ criteria i.e. the persons having sound knowledge of the banking sector, are only
allowed to take shares more than 5%. The total foreign investment in private sector banks
cannot exceed 74% of the paid-up capital of the bank. Additionally, at least 26% of the paid-
up share capital of the private sector banks will have to be held by resident Indians. Banks,
including foreign banks, can also acquire up to 10% shares in other banks. A person can
acquire a higher shareholding in a bank free from major regulatory or supervisory concerns,
but hostile takeover is prohibited.
Banks in India are governed by the Indian Companies Act, 2013, and Indian Banking
Regulation Act, 1949. Every listed bank with a minimum paid-up capital of Rs. 10 crores is
obliged to appoint, CEO as the key managerial personnel [Rule 8 A of the Companies
(Appointment and remuneration of managerial personnel rules), 2014(KMP rules)]. The
MAJ appointment process of CEOs in Indian banks is a bit different from non-banking
companies. Central Government appoints the CEOs of the public sector banks on the advice
of Banks Board Bureau after discussing with the Reserve Bank of India. The appointment of
CEOs in the private sector banks is done by the respective board. Sec 2(51) and sec 2(18)
clarifies that the presence of the CEO on the board is not mandatory, which is evident from
sec. 134(1), which suggests that the CEO should sign the audited financial statement if he is
the director of the company. To become a CEO of an Indian public sector bank, the person
should have a residual service of two years and possess at least one year’s experience as an
executive director. An individual being appointed as CEO should be solvent, should not
have suspended payment to creditors, or settled for payment of a lesser amount and must
not be convicted by a criminal court for an offense involving moral turpitude. In the
application form for RBI approval of a CEO’s appointment or reappointment, a private bank
needs to explain whether the person to be appointed as CEO is subject to any of the
disqualifications mentioned in Section 10B (4) of the Indian Banking Regulation Act, 1949.
CEO has a right to participate and advise in the audit committee meetings while discussing
the auditor’s report but cannot vote (sec. 177). The nomination and remuneration committee
recommends the remuneration policy of the CEO to the board (Sec.178). The CEOs are
appointed and removed in the board meetings (Sec.179), are not allowed to get involved in
forwarding dealings (Sec.194), and insider trading (Sec.195) in the company securities. The
CEO is not allowed to hold office in another company except its subsidiary simultaneously
and can be the non-executive director in other companies with board permission (Sec. 203).
Additionally, if the CEO vacates his office, the vacant post should be filled in the board
meeting within six months (Sec.203). The companies act, 2013, prohibits the CEO–Chairman
duality unless permitted by the company articles of association or if it is operating several
businesses and has hired CEOs for each business. Any relatives of CEOs of Indian banks are
disqualified for appointment as the auditor of the company. A return for every change in the
CEO should be filed with ROC (Registrar of Companies) within 30 days. The Central
Government under the provisions of subparagraph (4) of paragraph 8 of the Nationalized
Banks (Management and Miscellaneous provision) Scheme, 1970 and under section 9 of the
Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, is empowered to
remove the CEO of the public sector banks. Section 36 of the Banking Regulation Act, 1949,
empowers RBI to supersede the board of directors of banks in the public interest or for
preventing the affairs of any banking company being conducted in a manner detrimental to
the interest of the depositors for a period not exceeding twelve months. During this period,
an administrator with experience in law, finance, banking, economics, or accountancy needs
to be appointed, but the person cannot be a government officer. In such a case, RBI can
constitute a committee of at least three people to help the administrator in running the bank.
Under sec 16, of the Indian Banking Regulation Act, 1949, an individual cannot be
simultaneously a director in two banking companies. A person cannot hold directorships in
more than twenty companies, including the alternate directorships (Sec. 165 of the Indian
Companies Act, 2013). Out of the twenty companies, he cannot be a director in more than ten
public companies, which includes the holding and subsidiaries of such public companies.
The directorships in the non-profit companies (Sec. 8) and dormant companies are not
included while calculating the directorships of twenty companies. Whereas, as per Securities
and Exchange Board of India revised Clause 49, a person shall not serve as an independent
director in more than seven listed companies. Further, any person who is serving as a whole-
time director in any listed company shall not serve as an independent director in more than
three listed companies. The shareholders of the companies may restrict this limit by passing
a special resolution for its directors. The contravention of these provisions makes the Bank
director liable for a penalty of five thousand rupees per day. performance
3. Literature review and hypotheses formulation
The CEOs are entrusted with the high responsibility of managing the banks on behalf of the
stakeholders and are obligatory to assure that the bank performance harmonizes the banks’
long- term goals. For fulfilling these obligations, the CEO, as an individual, need to enshrine
certain qualities in line with the resource dependency theory. Norburn (1989) revealed that
different CEO characteristics matter and CEO selection is a key organizational decision,
which has important implications on firm effectiveness (Kesner and Sebora, 1994). It is
captivating to find a good ‘fit’ between the characteristics of the company and an individual
who will occupy the CEO position. Salancik and Pfeffer (1978) concluded that most firms in
different contexts recruit and hire CEOs with backgrounds and skills fitting the company’s
background. This section will further explain the importance of CEO characteristics and
their expected relationships with bank performance.

3.1 Chief executive officer professional financial education

Since banks are financial institutions, the financial and banking expertise of CEOs with
formal banking and financial education is imperative in dealing with the day to day affairs
as well as for designing tactical strategy. The CEO’s education level should be aligned with
the company’s performance (Rajagopalan and Dutta, 1996). Earlier researchers have
revealed the mixed results regarding the impact of professional financial education on
performance. Koyuncu et al. (2010) established that the firms controlled by a CEO with
operations and engineering background outperform the firms controlled by the CEOs with
other expertise domain. Such results may be obvious in the non-financial or manufacturing
firms in which the production and the operations expertise play a major role in discharging
the duties effectively and their smooth running. Furthermore, low-performance firms tend to
recruit a CEO with an operations background relative to marketing, finance, law, or
accounting. Additionally, Gounopoulos and Pham (2016), while analyzing the data of US
initial public offerings during 2003–2011, reveal that newly listed firms with finance expert
CEOs have a lesser probability of being engaged in earnings management relative to their
non-finance counterparts. This specifies that finance expert heads are helpful in financial
reporting and allow investors to gauge the firms’ fair value properly. Overall, the earlier
studies show the significance of CEO financial experience in higher quality financial
reporting and thus contribute to enhanced bank performance. Hence, we hypothesize that
the following:

H1. All else equal, there is a positive relationship between CEO professional financial
education and bank performance.

3.2 Chief executive officer–chairman duality

The board leadership structure is among the most contemporary and contentious
governance issues. Board may either be unitary (single-tier) or dual (two-tier) in structure,
and varies from country to country (Mallin, 2007). In the unitary board, the position of the
chief executive officer (CEO) and chairman are combined and are called CEO duality, while
in dual structure, the two positions are separate. Which one is healthier for performance, is a
crucial issue? The findings regarding the impact of CEO–Chairman duality on performance
are mixed (Peng et al., 2007). Research on the relation between CEO duality and firm
MAJ performance is generally grounded on agency theory and stewardship theory. Agency
theory suggests that CEO–Chairman conjecture weakens board control and contributes to
decline in performance. It postulates the conflict between the goals of shareholders and CEO
(Eisenhardt, 1989), which may in turn hurt, the performance (Chahine and Tohme, 2009).
Moreover, the concentration of power on one hand provides extraordinary supremacy to the
company heads, which may also adversely affect the bank performance (Rechner and
Dalton, 1991). On the other hand, stewardship theory postulates that directors are
custodians and perform harmoniously with the goals of their principals (Donaldson, 1990a,
1990b). Besides, the wish to excel, deliver quick and quality results stimulate them to
discharge their duties efficiently and take on challenging assignments which may in turn
affect the performance positively (Kaur and Singh, 2019; Kim et al., 2009). The findings
regarding the impact of CEO duality on performance are mixed. Rechner and Dalton (1991)
were among the pioneer researchers in CEO duality who focused on US firms from 1978 to
1983, and established significant lower performance in dual leadership structure, while
unitary structured firms’ constantly do better relatively (Donaldson and Davis, 1991).
Similarly, Pi and Timme (1993) have also revealed cost-effectiveness and high return on
assets (ROA) in dual leadership banks. They contended that monitoring benefits of CEO–
Chairman, non-duality might be counterbalanced by the expenses of maintaining CEO–
Chairman duality. Banks in which CEO duality exists experience lesser monetary pain by
having finer internal control systems (Simpson and Gleason, 1999). Dess and Beard (1984)
contend that duality is favorable when the resources are meagre, impulsive and complex.
Additionally, Harjoto and Jo (2008) evidenced a direct impact of CEO duality with Tobin’s q,
ROA and operating profit revealing the supremacy of stewardship theory over agency
explanation. Yang and Shan (2014), using the exogenous shock of 1989, Canada–United
States Free Trade Agreement, find that duality firms outperform non-duality firms by 3%–
4% when their competitive environments change. Further, the performance difference is
larger for firms with higher information costs and better corporate governance. However,
some authors have found the inverse relationship (Ujunwa, 2012; Chen et al., 2005). Worrell
et al. (1997) have tested stock price reactions to CEO duality and suggest a negative
relationship. Griffith et al. (2002) emphasized that shouldering both the burdens has an
insignificant effect on performance as additional responsibilities do not enhance the CEO’s
competence. Even though the findings are mixed, we expect that the CEO–Chairman duality
is beneficial for the banks and hence we formulate our next hypothesis as follows:

H2. All else equal, there is a positive relationship between CEO–Chairman duality and
bank performance.

3.3 Chief executive officer age

The potential outcome of CEO age on a firm’s achievements has continuously grabbed the
attention of researchers. It may be presumed that experienced executives are economical
relative to inexperienced young executives. The studies on the impact of CEO age on
performance reveal mixed evidence (Bertrand and Schoar, 2003). One strand of studies
argues that older CEOs are more conservative (Hambrick and Mason, 1984), focus on
projects that produce earlier results and are risk-averse, which may negatively affect the
performance of the firms (Bertrand and Mullainathan, 2003; Zhang and Rajagopalan, 2010).
In this context, another argument suggests that younger CEOs mostly concentrate on short
term goals (Hirshleifer, 1993), which may lead to performance growth (Child, 1974).
However, the other strand of the literature assumes that the experience and quality of
upper management increase with age, which in turn affects the performance positively
(Fischer and Pollock, 2004; Peni, 2014). Gibbons and Murphy (1992) reveal that older CEOs Bank
are inclined to prefer assignments that reimburse before their departure. Thus, prior performance
literature normally specifies that executive age may impact firm performance and envisage
that CEOs’ age affects their risk preferences and risk-taking behavior (Berger et al., 2014).
Since younger CEOs may be punished more severely for underperformance affecting their
future career opportunities adversely, they may be encouraged to take up more conservative
policies. Thus, in the earlier literature, the relationship of CEOs’ age and performance has
been predicted negatively. Hence, we posit the following hypothesis:

H3. All else equal, there is a negative relationship between CEO age and bank
performance.

3.4 Chief executive officer gender

The association linking CEO gender and firm performance is a relatively new research area
(Khan and Vieito, 2013). The Indian Companies Act, 2013, makes the appointment of a
woman director in the board compulsory under sec 149(1) for the effective monitoring of the
companies. Studies on the linkage between CEO gender and firm performance (Khan and
Vieito, 2013; Peni, 2014) disclose that organizations with female directors’ witness enhanced
performance relatively. Carter et al. (2010) proclaim that competent women must get a
chance to partake in the board since they enjoy peripheral networks and other traits useful
for firms. However, the firms are apprehensive in appointing in women CEOs and assess the
pros and cons before employing them. Researchers also argued that women’s enhanced
supportive leadership approach might be more fruitful relative to men’s competitive
techniques (Eagly and Carli, 2003). The women are more conventional and cautious than
men (Powell and Ansic, 1997; Jianakoplos and Bernasek, 1998; Levin et al., 1988; Sunden and
Surette,1998; Byrnes et al., 1999), tend to evade financial detriment and are reluctant to take
excessive risks (Schubert, 2006). Martin et al. (2009) reveal the ability of the capital market to
distinguish gender diversity in risk aversion and witnessed the reduction in capital market
risk measures after a female CEO appointment. Similarly, Srivastava et al. (2018) established
that the presence of female directors on the board and their independence have a negative
association with the cost of equity, whereas the level of involvement of female directors on
different committees has a positive association with ROA. Chen et al. (2016) have suggested
that male CEO-Chairs are more likely to be involved in bribery than female CEO-Chairs
indicating that males are more likely to be unethical, which is moderated by culture,
specifically, under the dimensions of institutional collectivism, future orientation and
performance orientation. This may affect the CEO decisions, ultimately leading to reduced
performance. The studies of Smith et al. (2006) and Carter et al. (2003) revealed an
affirmative association between gender diversity and firm performance, opining the
increase in the supervising functions of the board due to the presence of female directors and
are vigilant while making investment decisions. However, few researchers reveal an
insignificant or inverse association between female executives and firm performance.
Bonner (2008) suggests that men tend to be overconfident relatively, which is visible in their
approach leading to a significant disparity in the performance of the firm headed by them.
Lee and James (2007), analyzed a sample of 1,556 firms and investigated the shareholders’
response regarding the announcement of hiring either a female or male CEO, reveal the
negative response of shareholders to the declaration of female CEO appointments relative to
male CEO engagements. However, the negative response is less if the female is promoted to
the CEO position from inside the company. Strelcova (2004) studied a sample of 58
companies managed by female CEOs during 1985–2004 using stock price returns and found
MAJ that companies headed by male CEOs performed better relatively, as the stock prices return
decline significantly in the year of female CEOs appointment but was insignificant in the
following years and depends on other factors also. Additionally, Singhathep and Pholphirul
(2015) and Amaran (2011) reveal that male CEOs are found to enhance the firms’
performance as compared to female CEOs. Therefore, in line with the earlier literature, we
hypothesize that the following:

H4. All else equal, CEO gender affects bank performance.

3.5 Chief executive officer tenure

CEO tenure is defined as the CEO’s time in the current office and is an important
characteristic for which academicians and management scholars have searched the answers
for its over-time impact on performance. Theorists suggest that CEO tenure is linked to
determination and commitment to established policies since CEOs are more certain about
the accuracy of their vision in the past (Hambrick and Fukutomi, 1991). An executive’s
authority increases with each year in office. He or she and is also able to build a team of
executives with aligned views and demographics (Westphal and Zajac, 1995). It enhances
their autonomy and control and thus are better able to refuse the demands for alteration as it
confers them rejection power on the endeavors that are not in line with the traditional
ideology (Miller, 1991). Adams et al. (2005) argued that higher tenure normally indicates
higher power leading to higher stock performance but concurrently higher volatility too and
entail usual risk-return hypothesis, implying that higher tenured CEOs prefer to higher
returns rather than more secured projects with lower returns. Prior studies have rendered
mixed results on the relationship between CEO tenure and performance. Some studies reveal
a positive relationship (Peni, 2014; Baysinger and Hoskisson, 1990). Hrebiniak and Alutto
(1975) established a positive connection between longer-tenured CEOs and commitment
toward their results, which leads to higher enticement to perform well. Miller (1991)
contended that CEO’s strategy probably remains unaffected with the increase in tenure and
favor steadiness and efficiency over inconsistency, possibly due to the self-satisfaction with
the success and appropriateness of his own strategy and stops reinventing. He strongly
suggests a positive bond between loyalty toward the company and tenure, which sooner or
later can contribute to higher performance. However, research on the association of tenure
has continually confirmed a converse relationship between tenure and organizational
performance (Finkelstein et al., 2009; Al-Matari et al., 2012; Nguyen et al., 2018; Kaur and
Singh, 2019). Recently hired executives are more enthusiastic about experimenting (Miller
and Shamsie, 2001) and pursue pioneering tactics (Bantel and Jackson, 1989) while
executives with longer tenure are inclined to resist tactical changes (Finkelstein and
Hambrick, 1990). Long-serving CEOs may be engaged in the facilitation of doubtful loans
either for themselves or for relatives. Even though the earlier findings are mixed, we expect
that the long tenure of the CEO is beneficial for the banks. Thus, we posit the following
hypothesis:

H5. All else equal, there is a positive relationship between CEO tenure and bank
performance.

3.6 Chief executive officer prior experience as chief executive officer

While boards conventionally appoint outsiders based on their professional expertise, they
are now concentrating on picking executives with prior CEO experience for the post of CEO.
The tasks performed by the CEOs are different and demand a completely different skill set Bank
as compared to those required for subordinate level managerial jobs and are most effectively performance
attained through specific job experiences (McCall, 2004). The “heir apparent,” inner entrant,
recognized as the heir, before CEO retirement is brushed up for CEO position by the serving
CEO, undoubtedly gets exposure to various facets of the CEO position (Zhang and
Rajagopalan, 2006). But candidates, who were CEOs in their past, would have experienced
the CEO tasks broadly and acquired the needed competencies during this process.
Additionally, boards may choose candidates with earlier CEO experience since the threat
of information asymmetry and inappropriate selection intrinsic in hiring from outside is
less for existing CEOs (Zhang, 2008). Sufficient trustworthy public information regarding
directors’ performance with prior CEO experience is available. Despite these advantages,
Zhang (2008) reveals that CEOs having prior position-specific experience underperform
relative to their peers who are lacking such familiarity and show an inverse correlation
between earlier CEO experience and post-succession financial performance of the firm.
The empirical studies are mixed in nature regarding the impact of prior CEO experience
as CEO on performance. Ang and Nagel (2009) reveal that CEOs having prior experience
as CEOs perform worse than CEOs having without such experience. Firms hiring a CEO
with such experience, have higher debt ratios and a higher chance of bankruptcy than
those hiring a non-ex-CEO. Consistently, the stock market reacts to succession
announcements when the successor has prior CEO experience but not when the outside
successor lacks this experience (Elsaid et al., 2011). It could be because transferring job-
specific skills across organizations always involves a performance penalty, which may be
due to dissimilarity in the organizational culture (Hamori and Koyuncu, 2015). Since such
CEOs have the previous track record, they are thought to be lesser risky for distressed
firms and may effectively handle performance blues. Even though the results are mixed,
we expect that they do boost performance because of their prior experience. We posit the
following hypothesis:

H6. All else equal, there is a positive relationship between CEO having prior CEO
specific experience and bank performance.

3.7 Chief executive officer experience

The experience makes a person adept in his profession and a trusted leader. Wegge et al.
(2008) find that the experienced CEO strengthens the performance and can manage the
business environment adeptly. For quality decisions, CEOs must have career experience in
various professions so that they could incorporate new technology into the business based
on their prior career experience. Moreover, Matsunaga and Yeung (2008), Schrand and
Zechman (2012) and Jiang et al. (2013) revealed more conservative accounting policies and
more accurate earnings forecasts in well-experienced CEO managed companies and thus
improves the efficiency of the organizations. This supports the resource dependency theory,
which suggests a direct impact of CEO experience on firm profitability. However, Erickson
et al. (2006) opined that experienced CEOs call for more rewards and incentives, resulting in
higher costs and thus a decline in corporate performance. The younger and less experienced
CEO contributes to the higher volatility in the firm performance. Hamori and Koyuncu
(2015) suggest that the previous work experience of the CEO is inversely linked to post-
succession firm financial performance. Even though the earlier findings are mixed, we
expect that experienced CEOs enhance performance. Thus, in line with the earlier
discussion, we hypothesize that the following:
MAJ H7. All else equal, there is a positive relationship between CEO total career experience
and bank performance.

3.8 Chief executive officer busyness

CEO busyness is a state whereby the CEO holds directorships in other companies. Busyness
hypothesis (Ferris et al., 2002) claims that a CEO with multiple directorships may face
difficulties in managing the firms effectively. It presumes that directors holding multiple
directorships are too busy to monitor management adequately, which may lead to high
agency costs. Hence, such directors would be overcommitted and consequently may tend to
shirk their responsibilities leading to lower performance. However, another strand of
literature argues that directors holding multiple directorships have enhanced professional
networks, higher integrity and reputation, and this may prove beneficial to the
organizations (Masulis and Mobbs, 2014; Mendez et al., 2017). Prior studies have revealed
both positive (Fama and Jensen, 1983; Geletkanycz and Boyd, 2011; Pandey et al., 2019) and
negative relationships (Fich and Shivdasani, 2006; Peni, 2014) of CEO busyness with the
performance. Jiraporn et al. (2009) believe that busy CEOs are more experienced for
improved supervising and advising roles. Similarly, Chiang and He (2010) contend that
CEOs holding dual jobs are bestowed with better business knowledge and experience.
Whereas, Pandey et al. (2015) have addressed whether CEOs’ busyness affects the family
firms’ performance and demonstrates an inverse relationship with firm performance (Iman
et al., 2019). Hence in congruence with previous literature and the propositions of the
resource dependency theory, we predict a negative association between CEO busyness and
bank performance. Thus, we posit as:

H8. All else equal, there is a negative relationship between CEO busyness and bank
performance.
Hence, from the earlier literature, we can conclude that the CEO’s characteristics play a
significant role in bank performance.

4. Variables and data

4.1 Variables
Following previous studies (Lin and Zhang, 2009; Berger et al., 2010) we have used (ROA),
return on equity (ROE), pre-provision profit ratio (PPR), net interest margin (NIM) and non-
performing loan ratio (NPLR) as the performance measures of the banks. All these ratios are
measured as follows: ROA is calculated as the ratio of Net Income to Total Assets, which
assess how efficiently a bank uses its assets for generating income. ROE measures the rate
of return on resources provided by shareholders. It indicates the amount of earnings per
rupee that equity shareholders have invested. A higher ratio is better for shareholders. NIM
is measured as net interest income divided by the total assets. PPR is calculated as operating
profit (operating income minus operating expenses) over the total assets. NPLR has been
calculated as the ratio of the total amount of non-performing loans to total loans (Liang et al.,
2013).
The explanatory variables used in this study include the CEO characteristics and other
banks’ specific control variables. The variables related to CEO characteristics include
professional financial education of the CEO (FE), CEO–Chairman duality (DUALITY), CEO
age (CAGE), CEO gender (GENDER), tenure of the CEO within the bank as CEO (CEOT),
CEO prior experience as CEO (CEOPE), CEO total career experience (CEOTE) and CEO
busyness (BUSY).
 Following earlier studies (Lin and Zhang, 2009; Berger et al., 2010), we have considered Bank
four control variables such as bank size, bank age, growth of deposits and capital structure performance
in our analysis. Bank size (FS), is calculated as the natural log of total assets (Bhagat and
Bolton, 2008). Smirlock (1985) argues that the growing bank size is positively related to bank
profitability. The positive influence of bank size on profitability can be attributed to the fact
that large banks may be able to generate the benefits of economies of scale and better
operational efficiency. However, extremely large banks may also bear an inverse
relationship with the performance, which might be due to higher agency costs, bureaucratic
processes and other costs involved in managing large organizations (Stiroh and Rumble,
2006; Pasiouras and Kosmidou, 2007). Hence, the overall effect of bank size needs an
empirical determination. The theory of “learning by doing” suggests a positive relationship
between the bank age and profitability and posits that as the age of the bank increases, there
is a likelihood of improvement in their productive efficiency over time by learning from their
experience (Balik and Gort, 1993). We also expect a positive association between bank age
and profitability since old banks might have enjoyed the advantages such as longer custom,
good reputation and a broader client base relatively. The higher growth of annual deposits
may also affect the performance of the banks since a rapidly growing bank is expected to
enlarge its business and ultimately higher profits. The relationship between deposit growth
and performance depends on the banks’ ability to convert their deposit into income earnings,
which reflects its operating efficiency. The capital ratio i.e. total equity to total assets, has
also been considered as a determinant of bank performance as banks having higher capital
ratios are considered to be stable and safer. The measures of all these variables are
summarized in Table 1.

4.2 Data
We targeted all the commercial banks operating in India. To construct a balanced panel data
set, we have included those commercial banks which have continuous data available
throughout the period. The foreign banks have been excluded as they are not registered in
India under the Indian Companies Act, 2013, and are not listed on the Indian stock
exchanges. They are operating as the branch office of their parent organization. Hence, they
do not need to comply with Clause 49 listing agreement and submit the corporate
governance report to stock exchanges. Therefore, their corporate governance data is not
available. Finally, we construct a balanced panel data sample of 36 banks, which include 21
public sector banks and 15 private sector banks. The period of the study is 2009–2010 to
2016–2017. The data on CEO characteristics is hand collected from the annual reports and
the website of the respective banks. In the case of the unavailability of data, we referred to
Bloomberg, Wikipedia, as well as LinkedIn accounts of the corresponding CEOs. The
monetary information has been gathered from the Prowess IQ CMIE database and the
Bloomberg database. For further analysis, data has been divided into different subsets.
Based on ownership, we have divided the whole sample into public and private banks.
Based on size, the banks with total assets in the above tertile have been termed as
large banks, and those with the asset value in the lower tertile have been termed as small
banks. Similarly, large board banks have been defined as the board above the median board
size, and the smaller board banks have been defined as the banks below the median board size.
Table 2 shows the descriptive statistics of the sample. It reveals that the mean ROA of all
the banks is 0.65, whereas it is 0.36 and 1.05 for public and private banks, respectively,
indicating that the private banks are more profitable than the public sector banks. Public
sector banks are generally large and old. The private sector banks are well-capitalized (mean
ETA = 0.05) and have higher deposit growth than the public sector banks. Overall, the data
MAJ Variables Measures

Panel A: Dependent variables

ROA Net Profit/Total Assets
ROE Net Profit/Total Equity
NIM (Investment Income – Interest Expenses)/Average Earning Assets
PPR (Operating Income - Operating Expenses)/Total Assets
NPLR Problem loans/ Total Loans
Panel B : Board characteristics variables
FE If the CEO has professional financial education=1; If the CEO does not have professional
financial education =0
DUALITY If the CEO holds CEO and Chairman positions simultaneously=1
If the CEO does not hold CEO and Chairman positions simultaneously=0
CAGE CEO age in years
GENDER Male CEO=1; Female CEO=0
CEOT CEO tenure as the CEO of the bank in years
CEOPE If the CEO has prior experience as CEO=1; If the CEO does not have prior experience as
CEO=0
CEOTE CEO total career experience in years
BUSY If the CEO holds directorships in 3 or more other boards=1; If the CEO holds directorships in
less than 3 boards=0
Panel C: Control variables
FS Natural log of total assets
FAGE Log (Current year – year of establishment)
DG Percentage of growth in deposits
ETA Total Equity Capital to Total Asset ratio

Notes: *CEOs having academic graduate degrees in the area of accounting, finance, commerce, economics
or any other professional courses related to finance such as chartered accountant, chartered financial
analyst, cost and management accountant, company secretary ship or master of business administration in
Table 1. finance are considered as financially educated otherwise as CEOs without financial education. Professional
Measures of the financial education (FE) takes the value of one if the CEO has any one of the aforementioned degrees and
variables zero otherwise

indicates that 37% of the CEO possesses professional financial education. 49% of the CEOs
in the private sector banks and 28% of the CEOs in the private sector banks hold
professional financial education. CEO duality is not common in private sector banks (7 %),
but 74% of the public sector banks have CEOs who are also holding the position of
the Chairman. The data further reveals that the average age of the CEO is 57.33 years. The
youngest CEO is 36 years of age, and the oldest CEO is 69 years which is in line with the
provisions of the Indian Companies Act, 2013, which lays down the CEO’s minimum age at
21 years and the maximum age of CEO at 70 years in the private sector banks and 60 years
in public sector banks as per RBI guidelines. The male CEOs mainly dominate the Indian
banking system. The average tenure of the CEOs in private banks (mean = 5.52 years) is
relatively higher than that of public sector banks (mean = 1.57 years). We observe that the
private banks are inclined to hire CEOs who have prior CEO experience. In public sector
banks, the direct appointment of an outsider on the post of CEO is rare. They are mostly
either the executive directors or the serving CEOs of other public sector banks (mean = 0.35).
The CEOs of the public sector banks (mean = 35.34 years) are more experienced than that of
the private sector banks (mean = 33.60 years). Some of the private sector banks appoint
younger CEOs. The CEOs of the public sector banks (mean = 0.38) are busier than their
 All banks Public sector banks Private sector banks
Bank
Variables Mean Std. dev. Mean Std. dev. Mean Std. dev. performance
Panel A1: Dependent variables
ROA 0.65 0.77 0.36 0.67 1.05 0.74
ROE 0.09 0.12 0.07 0.13 0.11 0.09
NIM 2.95 0.71 3.47 0.51 3.42 0.70
PPR 0.17 0.07 0.15 0.04 0.19 0.09
NPLR 2.32 2.41 3.18 2.70 1.11 1.11
Panel A2: CEO characteristics
FE 0.37 0.48 0.28 0.45 0.49 0.50
DUALITY 0.46 0.49 0.74 0.43 0.07 0.26
CAGE 57.33 5.13 57.61 3.11 56.95 7.04
GENDER 0.91 0.28 0.94 0.22 0.86 0.34
CEOT 3.21 3.73 1.57 1.13 5.52 4.76
CEOPE 0.41 0.49 0.35 0.47 0.5 0.50
CEOTE 34.61 5.77 35.34 3.18 33.60 8.02
BUSY 0.37 0.78 0.38 0.48 0.36 1.07
Panel A3:Control variables
FS 2.44eþ12 3.22eþ12 3.18eþ12 3.73eþ12 1.40eþ12 1.92eþ12
FAGE 77.91 33.008 90.92 22.86 59.7 36.33
DG 0.14 0.13 0.11 0.11 0.18 0.14
ETA 0.04 0.04 0.03 0.02 0.05 0.06
Number of banks 36 21 15
Number of observations 288 168 120

Notes: Table 2 reports descriptive statistics on the variables used in the study. The sample is a panel data
of Public, Private and All the banks during the period 2010–2017. Panel A1 reports the summary statistics Table 2.
of dependent variables. Panel A2 reports the summary statistics of CEO characteristics variables. Panel A3 Descriptive statistics
reports the summary statistics of control variables. For the definition of variables, please refer to Table 1 of all the variables

private counterparts (mean = 0.36). This may be because the CEOs in the public sector
banks hold directorships on the board of their subsidiaries, which is less common in the
private sector banks.
Table 3 shows the trends in various CEO characteristics in Indian banks. The data
shows that the number of banks having CEOs with professional finance education varies

No. of Banks having No. of Banks having No. of Banks having No. of Banks
CEOs with a professional CEOs with dual role CEOs with Prior having CEOs more
Year finance education as chairman experience as CEOs than 3 directorship

2010 14 (39%) 21 (58%) 15 (42%) 11 (30%)

2011 14 (39%) 20 (55%) 14 (39%) 11 (30%)
2012 14 (39%) 20 (55%) 15 (42%) 15 (42%)
2013 13 (36%) 20 (55%) 14 (39%) 15 (42%)
2014 12 (33%) 20 (55%) 14 (39%) 13 (36%)
2015 13 (36%) 18 (50%) 14 (39%) 13 (36%)
2016 13 (36%) 08 (22%) 17 (47%) 10 (28%)
Table 3.
2017 14 (39%) 07 (19%) 16 (44%) 10 (28%) Trends in number of
banks with various
Source: Annual report of the respective banks CEO characteristics
MAJ between 33% to 39%. It is observed that the number of banks having CEOs who have
played the dual role (CEO as well as chairman) has declined after 2015. Similarly, the CEOs
are refraining from taking additional assignments over a period of time. The banks prefer to
hire the CEOs having prior experience as CEO in recent years.
The correlation matrix presented in Table 4 rules out the problem of multicollinearity as
the values of the correlation coefficient is very small, and most of the coefficients are
statistically insignificant. Additionally, the VIF of the explanatory variables was less than 5,
which also indicates no multicollinearity. The professional finance education, CEO tenure,
and prior experience of the CEO are positively correlated to the performance, whereas the
CEO duality and CEO gender are negatively correlated with the performance of the banks.
As far as the bank-specific variables are concerned, equity to asset ratio and bank age is
negatively correlated.

4.3 Models specification and estimation method

Assuming the linear relationship between the CEO characteristics and bank performance, a
panel data model is specified as follows:

BANKPit ¼ ai þ b 1 FEit þ b 2 DUALITYit þ b 3 CAGEit þ b 4 GENDERit þ b 5 CEOTit

þ b 6 CEOPEit þ b 7 CEOTEit þ b 8 BUSYit þ b 9 FSit þ b 10 FAGEit
þ b 11 DGit þ b 12 ETAit þ 2it (1)

It is expected that older executives may take care of their interests and may prefer to lead a
peaceful life (Bertrand and Mullainathan, 2003) at a later stage of life, which may lead to a
decline in the performance of the banks. Additionally, it can also be argued that with the
increase in the tenure of CEOs, the experience and adoption toward job also increases, which
may reduce uncertainty and ultimately enhance the performance over time. Hence, we
expect a non-linear relation between CEO age, CEO tenure and bank performance.
Therefore, to investigate the curvilinear relationship of CEO age and CEO tenure with bank
performance, we add the squared term of CEO age and CEO tenure in the model and is
specified as follows:

BANKPit ¼ ai þ b 1 FEit þ b 2 DUALITYit þ b 3 CAGEit þ b 4 CAGEit2 þ b 5 GENDERit

þ b 6 CEOTit þ b 7 CEOTit2 þ b 8 CEOPEit þ b 9 CEOTEit þ b 10 BUSYit

þ b 11 FSit þ b 12 FAGEit þ b 13 DGit þ b 14 ETAit þ 2it (2)

Where, BANKP it = Bank performance indicators measured by ROA, ROE, NIM, PPR and
NPLR. 2it is the disturbance term, i is the bank from 1 to 36, and t is the values of years from
2010 to 2017. The b parameters capture the possible effect of explanatory variables on bank
performance indicators. The CEO attributes used in the study are as follows: FE is CEO
professional financial education, DUALITY is the CEO–chairman duality (Peni, 2014),
CAGE is the age of CEO (Davis, 1979), CAGE2 is the square of the age of CEO in years,
GENDER is the gender of CEO, CEOT is the CEO experience in years on CEO position
within the bank (Peni, 2014), CEOT2 is the square of the tenure of CEO within the bank as
CEO, CEOPE is the prior experience of CEO on CEO position in any other organization,
CEOTE is the total career experience of CEO (Bertrand and Schoar, 2003), BUSY is the
dummy variable for CEO busyness. FS is the bank size, FAGE is the bank age, DG is the
Var. ROA ROE NIM PPR NPLR FE DUALITY CAGE GENDER CEOT CEO PE CEO TE BUSY FAGE FS DG ETA

ROA 1.00
ROE 0.87** 1.00
NIM 0.58** 0.36*** 1.00
PPR 0.68** 0.48** 0.57** 1.00
NPLR 0.80** 0.80** 0.45*** 0.37** 1.00
FE 0.19** 0.03 0.24*** 0.30** 0.13** 1.00
DUALITY 0.09 0.16 0.30** 0.09 0.007 0.19** 1.00
CAGE 0.03 0.03 0.03 0.06 0.05 0.11* 0.08 1.00
GENDER 0.11* 0.01 0.06 0.31** 0.003 0.24** 0.11* 0.14** 1.00
CEOT 0.46** 0.19* 0.57** 0.45** 0.29** 0.32** 0.35** 0.23*** 0.007 1.00
CEOPE 0.16* 0.06 0.27*** 0.26*** 0.06 0.31** 0.23** 0.09* 0.04 0.29** 1.00
CEOTE 0.01 0.04 0.02 0.13 0.03 0.20** 0.13** 0.60*** 0.06 0.18** 0.02 1.00
BUSY 0.09 0.05 0.01 0.14 0.04 0.19** 0.01 0.07 0.10* 0.09* 0.05 0.05 1.00
FS 0.06 0.10* 0.02 0.26*** 0.15** 0.14** 0.06 0.06 0.19** 0.02 0.11* 0.10* 0.10* 1.00
FAGE 0.37*** 0.12 0.38** 0.44** 0.26** 0.27** 0.41*** 0.11* 0.23** 0.54** 0.34** 0.08 0.19** 0.08 1.00
DG 0.44** 0.40** 0.27*** 0.25*** 0.42*** 0.23** 0.08 0.11 0.009 0.24** 0.19** 0.07 0.10* 0.07 0.25** 1.00
ETA 0.21** 0.20** 0.009 0.36** 0.05 0.05 0.15** 0.002 0.16*** 0.08 0.13** 0.15** 0.10** 0.33** 0.06 0.02 1.00

Notes: *, **and ***show the 10%, 5% and 1% level of significance respectively. For definition of variables please refer Table 1

all the variables used

Correlation matrix of
Bank

Table 4.

in the analysis
performance
MAJ yearly growth in bank deposits, ETA is the ratio of total equity to total assets of the bank.
(The definition of the variables has been given in Table 1)
This study uses the penal data models with the standard errors clustered at the industry
level. We have used the panel data techniques to estimate the models, as the unobservable
heterogeneity and endogeneity of CEO characteristics cannot be captured through pooled
regression estimation. Fixed effect and random effect models are the most commonly used
static panel data models (Adams and Mehran, 2008). The statistical tests such as the LM test
and Hausman test have been carried out to find out a suitable panel data technique for
estimating the bank performance equation. All these tests ultimately preferred the use of the
fixed-effect model over the random effect model. The fixed-effect model allows control for
unobserved heterogeneity, which describes individual-specific effects not captured by
observed variables. The term “fixed effects” is attributed to the idea that although the
intercept may differ across individuals (banks), each individual’s intercept is time invariant.
The correctness of the models is specified by the F-statistics. Additionally, we conduct
robustness tests to check the strengths of the models by dividing the sample based on
different characteristics such as ownership, bank size and board size.

5. Discussion of results
5.1 Whole sample results
The results reported in Table 5, reveal the panel data results of the impact of CEO
characteristics on bank performance for all banks considered for this study. The LM test
and Hausman test results conclude that the fixed effect model estimation is suitable for this
analysis. The p-value of F- statistics is significant at 1% level and thus indicates the fitness
of the model. Additionally, the adjusted R2 provides the percentage of variation reported by
the explanatory variables having an impact on the dependent variable.
We find that the CEO professional qualification in finance leads to higher bank
performance and supports our hypothesis. This finding is confirmed by the earlier work of
Gottesman and Morey (2006), Guner et al. (2008) and Arumona et al. (2019). Since the banks
are financial institutions, the financial expertise of the CEOs is imperative for the smooth
functioning of the banks. Financial expert CEOs participate more in financial markets since
they are aware of financial matters (Lusardi and Mitchell, 2006). Most low-cost borrowers
display an adequate level of financial literacy, which may affect the performance positively
(Lusardi and BassaScheresberg, 2013).
Our study indicates a positive and significant impact of CEO-duality on the performance
of the banks and supports our hypothesis. This is in congruence with the stewardship
theory, which has recognized the benefits of the unity of command at the senior-most
position (Finkelstein and D’Aveni, 1994). The positive relationship implies that the person
holding both the CEO and Chairman positions may have more extensive knowledge of the
bank environment as well as implement strategic decisions more successfully. It also
weakens the comparative powers of other interest groups and increases the responsiveness
to changes and makes the leaders accountable. The result of our study confirms the findings
of Kaur and Singh (2019), Gao et al. (2017), Pham et al. (2015) and Peni (2014).
The overall results indicate that the performance of the banks decreases with the
increase in CEO age. It is consistent with the argument that older executives may be more
inclined in advancing their interests and goals and enjoy the peaceful life (Bertrand and
Mullainathan, 2003), which may lead to a decline in the performance of the firms headed by
older executives. Our result contradicts the findings of Peni (2014) but supports the findings
of Davidson et al. (2007). Additionally, we find a curvilinear relationship between CEO age
and some of the performance measures.
 ROA ROE NIM PPR NPLR
Variable I II I II I II I II I II

FE 0.358** (0.106) 0.393*** (0.106) 6.152** (2.038) 6.643** (2.034) 0.174* (0.097) 0.162 (0.098) 0.013* (0.007) 0.014** (0.007) 1.159** (0.358) 1.214** (0.355)
DUALITY 0.569*** (0.103) 0.562*** (0.102) 11.537*** (1.983) 11.483*** (1.963) 0.351*** (0.094) 0.354*** (0.094) 0.011 (0.007) 0.010 (0.007) 3.226*** (0.348) 3.231*** (0.343)
CAGE 0.012 (0.012) 0.188* (0.019) 0.346 (0.235) 1.795 (1.905) 0.006 (0.011) 0.075 (0.091) 0.0005 (0.0008) 0.011 (0.007) 0.053 (0.041) 0.022 (0.333)
CAGE2 0.001* (0.0009) 0.014 (0.018) 0.0008 (0.0009) 0.0001 (0.0007) 0.0007 (0.003)
GENDER 0.266 (0.175) 0.316* (0.175) 3.376 (3.356) 3.934 (3.350) 0.259 (0.159) 0.238 (0.161) 0.020 (0.012) 0.022* (0.012) 0.684 (0.590) 0.712 (0.586)
CEOT 0.036* (0.022) 0.003 (0.028) 0.322 (0.424) 0.589 (0.539) 0.009 (0.020) 0.017 (0.026) 0.003** (0.001) 0.002 (0.002) 0.074 (0.074) 0.253** (0.094)
CEOT2 0.003 (0.002) 0.106** (0.045) 0.0002 (0.002) 0.00003 (0.001) 0.024** (0.007)
CEOPE 0.064 (0.098) 0.077 (0.097) 3.550* (1.885) 3.819** (1.867) 0.124 (0.089) 0.121 (0.090) 0.006 (0.007) 0.006 (0.007) 0.233 (0.331) 0.281 (0.326)
CEOTE 0.011 (0.011) 0.077** (0.011) 0.385* (0.216) 0.312 (0.223) 0.027** (0.010) 0.030** (0.010) 0.001** (0.0008) 0.001 (0.008) 0.027 (0.037) 0.025 (0.039)
BUSY 0.039 (0.041) 0.031 (0.041) 0.022 (0.801) 0.161 (0.794) 0.032 (0.038) 0.034 (0.038) 0.004 (0.003) 0.004 (0.003) 0.054 (0.140) 0.033 (0.138)
FS 0.664*** (0.112) 0.655*** (0.111) 14.96*** (2.150) 14.578*** (2.136) 0.054 (0.102) 0.053 (0.103) 0.027** (0.008) 0.028** (0.008) 2.333*** (0.378) 2.234*** (0.373)
FAGE 0.248 (0.580) 0.262 (0.660) 6.796 (11.099) 8.158 (12.136) 0.311 (0.528) 0.270 (0.609) 0.010 (0.042) 0.004 (0.048) 1.474 (1.951) 1.906 (2.210)
DG 1.081*** (0.245) 1.013*** (0.245) 21.367*** (4.697) 19.662*** (4.692) 0.050 (0.223) 0.040 (0.226) 0.064*** (0.017) 0.062** (0.029) 2.724** (0.825) 2.368** (0.820)
ETA 9.658*** (1.593) 9.36*** (1.599) 169.07*** (30.480) 169.35*** (30.587) 0.897 (1.451) 1.088 (1.475) 0.095 (0.115) 0.069 (0.117) 34.201*** (5.357) 35.249*** (5.350)
Constant 18.244*** (2.647) 24.648*** (3.711) 400.867*** (50.658) 490.458*** (70.957) 4.867** (2.411) 2.545 (3.422) 0.841*** (0.192) 1.154*** (0.271) 58.346*** (8.904) 67.965*** (12.412)
LM Test x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) =
74.23 (0.0000) 45.44 (0.0000) 26.45 (0.0000) 23.20 (0.0000) 133.27 (0.0000) 119.83 (0.0000) 230.82 (0.0000) 189.87 (0.0000) 38.28 (0.0000) 35.19 (0.0000)
Hausman Test x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(12) = x 2(12) = x 2(12) = x 2(12) = x 2(12) =
0.79 (0.0000) 66.77 (0.0000) 118.28 (0.0000) 208.90 (0.0000) 10.35 (0.0005) 0.31 (0.0000) 58.36 (0.0000) 40.24 (0.0001) 196.09 (0.0000) 325.96 (0.0000)
F-Test F (35,240) = F (35,238) = F (35,240) = F (35,238) = F (35,240) = F (35,238) = F (35,240) = F (35,23) = F (35,240) = F (35,238) =
6.56 (0.0000) 6.44 (0.0000) 4.62 (0.0000) 4.89 (0.0000) 8.63 (0.0000) 8.26 (0.0000) 14.53 (0.00000) 14.13 (0.0000) 6.59 (0.00000) 7.03 (0.0000)
N 288 288 288 288 288 288 288 288 288 288
Adj-R2 0.0295 0.4534 0.0854 0.2009 0.0509 0.0414 0.0527 0.0378 0.0240 0.2620

Notes: We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are reported in parentheses. *, **and ***show the
10%, 5% and 1% significance level respectively

results for the whole

Bank

sample)
Table 5.

effect estimation
performance (fixed
and bank
CEO Characteristics
performance
MAJ We find that banks headed by male CEOs perform better. This supports the earlier findings
of Singhathep and Pholphirul (2015) and Amaran (2011). It could be because that male CEOs
are more prone to risk-taking (Bliss and Potter, 2002) and thus lead to higher performance.
Our result shows that CEO tenure has a positive impact on the banks’ performance and
suggests that longer serving CEOs can constitute a management team that is capable of
collaborating effectively and thus enhances performance. Longer tenured CEOs are an
important asset to the bank since they develop and enhance their learning about firm-
specific problems (Finkelstein, 1992). Longer tenure of the CEOs enhances their
accountability and inculcate a sense of ownership in them, which helps them in aligning
their objectives with that of the banks. Our findings are at par with the studies of Peni (2014)
and Baysinger and Hoskisson (1990). We do not find a strong non-linear relationship
between the tenure of the CEO and performance for Indian banks.
The coefficient of CEO having prior experience as a CEO is positive on the ROE of all the
banks. Job-specific experience improves entrepreneurs’ venture management skills.
Executives with prior venture experience are more financially successful in their current
assignments (Dyke et al., 1992; Stuart and Abetti, 1990). The total career experience of the
CEO affects ROE, NIM and pre-provision profit ratio of all the banks positively, which
supports the resource dependency theory. Our result supports the earlier results of Peni
(2014) and Wang et al. (2016). Experienced executives may have larger networks leading to
the enhanced performance of the banks. Experienced CEOs are paid more and perform
better (Falato et al., 2015). Companies with CEOs having experience in the finance and
accounting area are likely to face fewer frauds, which may improve the efficiency and
effectiveness of the banks.
Our results indicate that the busyness of the CEO does not explain the performance of all
the banks taken together and contradicts the resource dependency theory, which supports
that the CEOs holding external directorships introduces more expertise and business
networks resulting in enhancement of bank performance. The findings are at par with the
findings of Kiel and Nicholson (2007).
For control variables, we find that bank size bears a negative relationship with the
performance of all the banks, and its relationship with NPLR is positive, which suggests
that the large size of the banks also contributes to the higher NPA. This indicates that large
banks are not able to derive the benefits of economies of scale and are inconsistent with the
findings of Smirlock (1985) and Goddard et al. (2004). It could be due to agency cost,
bureaucratic process and extra cost incurred in managing large banks and supports the
findings of Stiroh and Rumble (2006) and Pasiouras and Kosmidou (2007). The effect of
deposit growth on bank performance in most of the cases are positive, which suggests that
the banks can convert their higher deposits into remarkable quantity income-earning assets
and thus enhance performance. Equity to asset ratio bears a negative and significant
relationship with the performance for all the banks, which is contrary to the findings of
Sufian and Chong (2008) and is positively associated with the asset quality measured by
NPLR. The possible reason may be that the Indian banks are low capitalized and thus have
to borrow funds on the higher cost, which reduces their NIM (Net interest margin) and
ultimately declines the performance.

5.2 Ownership effect

The mode of selection of the CEOs in the public and private sector banks is different. The
more autonomy given to the private sector banks in appointing the CEOs, may be reflected
in the characteristics of the CEOs and ultimately on their performance. Therefore, we
assume that role of CEO characteristics varies across the types of banks classified based on
ownership. Table 6 and Table 7 show the results for the impact of various CEO Bank
characteristics on public and private sector banks, respectively. The professional financial performance
education of the CEO improves the private sector banks’ performance. CEO duality is
beneficial for public sector banks. Male CEOs contribute to enhanced performance. In terms
of the association between CEO tenure and performance, the results are similar to the whole
sample results. The longer-tenured CEO helps improve the performance of the private sector
banks but not the public sector banks. The longer tenure increases the CEO’s ability, and its
uncertainty declines with the increase in CEO tenure and he or she has a long and trusted
performance track record. Longer tenure within the firm enables the CEO to contribute
effectively toward strategic growth (Westphal and Bednar, 2005). The CEO prior experience
as CEO positively affects the ROE of public sector banks. The busy CEOs in the public
sector banks are not beneficial for the banks in enhancing profit. The results related to other
firm-specific control variables are consistent with the whole sample results.

5.3 Size effect

The CEO should be an individual with a balance of skills, diversity and expertise who
possess the necessary qualification commensurate with the size of the banks. The CEO’s
responsibilities may vary depending on the banks’ structure, size and complexity. The
previous studies identify possible links between compensation, perquisites and firm size
(Murphy, 1985; Jensen and Murphy, 1990). The link between size and compensation is not
surprising since Murphy (1999) points out that most of the large firms set compensation by
looking at the compensation by peer group executives and size is typically a determinant of
which firms are in a peer group. The higher compensation in large banks may affect the
behavior and commitment of the CEO toward the betterment of the banks’ performance.
Hence, we expect that the CEO’s major duties may vary from banks to banks depending on
several factors, including the size of the company. Hence, in line with this argument, we
have divided the banks into large banks and small banks.
Tables 8 and 9 show the regression results of large and small banks, respectively. The
result shows that the CEOs having professional financial education contribute to the higher
performance of the small banks. The performance of large banks is benefitted by CEO
duality. CEO age plays a positive and significant role in the determination of the
performance of small banks. The male CEOs are leading to the enhanced performance of the
large as well as small banks. The longer-tenured CEOs are contributing to the higher
performance of both the banks but do not show any non-linear relationship. The results
related to the tenure of the CEO for small as well as large banks are consistent with the full
sample results. Other bank-specific variables such as bank size, age, the capital structure
also play a significant role in the determination of the financial performance of both types of
banks.

5.4 Board size effect

We also, investigate the divergent effects of CEO characteristics on the performance of the
banks that may be distinct based on-board size. Earlier researchers have proved a positive
association of larger board size with performance as it enlarges the pool of competence with
more knowledge and skills relative to smaller boards (Van den Berghe and Levrau, 2004)
and may shrink the dominance of CEO (Goodstein et al., 1994; Forbes and Milliken, 1999).
Additionally, the cost of having a larger board size may outshine the benefit if the board size
goes beyond a certain level. The effectiveness of the group decision-making process may
decrease as the size of the group gets larger, which may ultimately affect bank performance.
The CEO may be able to dominate the will of the directors in small boards, which might not
 MAJ

and bank
Table 6.

sector banks)
effect estimation
results for public
performance (fixed
CEO Characteristics
ROA ROE NIM PPR NPLR
Variable I II I II I II I II I II

FE 0.141 (0.112) 0.177 (0.111) 1.368 (2.292) 1.724 (2.288) 0.053 (0.103) 0.074 (0.104) 0.0003 (0.008) 0.0008 (0.008) 0.690* (0.385) 0.740* (0.391)
DUALITY 0.333** (0.114) 0.291** (0.112) 5.010** (2.328) 4.461* (2.321) 0.134 (0.105) 0.155 (0.106) 0.005 (0.008) 0.003 (0.008) 1.617*** (0.391) 1.567*** (0.397)
CAGE 0.004 (0.013) 0.368** (0.163) 0.102 (0.270) 3.982 (3.371) 0.020* (0.012) 0.191 (0.154) 0.0001 (0.001) 0.012 (0.012) 0.004 (0.045) 0.497 (0.577)
CAGE2 0.003** (0.001) 0.039 (0.338) 0.002 (0.001) 0.0001 (0.0001) 0.004 (0.005)
GENDER 0.294* (0.157) 0.381** (0.159) 3.853 (3.219) 4.671 (3.234) 0.156 (0.145) 0.104 (0.150) 0.016 (0.011) 0.019 (0.012) 1.040* (0.541) 1.159** (0.562)
CEOT 0.011 (0.034) 0.107 (0.089) 0.432 (0.703) 2.868 (1.847) 0.009 (0.031) 0.009 (0.084) 0.0005 (0.002) 0.008 (0.006) 0.193 (0.118) 0.152 (0.316)
CEOT2 0.033* (0.019) 0.845** (0.405) 0.003 (0.185) 0.002 (0.001) 0.017 (0.069)
CEOPE 0.095 (0.093) 0.089 (0.091) 3.936** (1.914) 3.744** (1.892) 0.117 (0.086) 0.117 (0.086) 0.009 (0.007) 0.009 (0.007) 0.206 (0.322) 0.205 (0.324)
CEOTE 0.012 (0.013) 0.005 (0.014) 0.308 (0.266) 0.112 (0.303) 0.009 (0.012) 0.019 (0.013) 0.001 (0.0009) 0.0006 (0.001) 0.015 ( 0.044) 0.007 (0.051)
BUSY 0.171* (0.100) 0.149 (0.098) 2.653 (2.058) 2.376 (2.038) 0.023 (0.155) 0.034 (0.093) 0.008 (0.007) 0.007 (0.007) 0.471 (0.346) 0.445 (0.349)
FS 0.061 (0.169) 0.082 (0.165) 0.493 (3.459) 0.728 (3.418) 0.067 (2.134) 0.056 (0.156) 0.008 (0.012) 0.007 (0.012) 0.765 (0.582) 0.791 (0.585)
FAGE 13.848*** (0.169) 14.510*** (2.280) 322.042*** (47.323) 330.415*** (46.995) 5.658** (0.155) 5.330** (2.148) 0.431** (0.176) 0.455** (0.176) 64.217*** (7.964) 65.009*** (8.050)
DG 0.774** (0.317) 0.848** (0.312) 12.894** (6.485) 13.710** (6.433) 0.606 (2.134) 0.560* (0.294) 0.054** (0.024) 0.056** (0.024) 1.750 (1.091) 1.845* (1.101)
ETA 3.871 (3.332) 2.021 (3.340) 127.951* (68.063) 105.440 (68.815) 0.833 (3.069) 0.110 (3.145) 0.390 (0.253) 0.455* (0.258) 49.042*** (11.454) 46.781*** (11.787)
Constant 59.553*** (7.101) 71.331*** (8.563) 1426.989*** (145.043) 1554.771*** (176.444) 26.471*** (6.540) 19.95** (8.064) 2.242*** (0.540) 2.628*** (0.663) 262.364*** (24.409) 277.63*** (30.224)
LM Test x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2 (1) = x 2(1) = x 2(1) = x 2(1) =
8.10 (0.0022) 8.32 (0.0020) 6.18 (0.0064) 6.53 (0.0053) 8.53 (0.0000) 74.88 (0.0000) 54.36 (0.0000) 42.74 (0.0000) 12.48 (0.0002) 12.58 (0.0002)
Hausman Test x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) =
63.57 (0.0000) 117.44 (0.0000) 54.94 (0.0000) 70.09 (0.0000) 37.08 (0.0000) 21.56 (0.0000) 36.80 (0.0002) 30.95 (0.0034) 48.32 (0.0000) 80.90 (0.0000)
F-Test F (20,135) = F (20,133) = F (20,135) = F (20,133) = F (20,135) = F (20,133) = F (20,135) = F (20,133) = F (20,135) = F (20,133) =
6.59 (0.0000) 7.26 (0.0000) 6.81 (0.0000) 7.14 (0.0000) 7.97 (0.0000) 7.42 (0.00000) 10.42 (0.0000) 10.06 (0.0000) 9.06 (0.0000) 8.95 (0.0000)
N 168 168 168 168 168 168 168 168 168 168
Adj-R2 0.0046 0.0052 0.0020 0.0022 0.0158 0.0129 0.0161 0.0180 0.0012 0.0011

Notes: We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are reported in parentheses. *, **and ***show the
10%, 5% and 1% significance level respectively
 ROA ROE NIM PPR NPLR
Variable I II I II I II I II I II

FE 1.025*** (0.218) 1.132*** (0.221) 16.001*** (3.143) 17.561*** ( 3.181) 0.396* (0.215) 0.368 (0.222) 0.057** (0.018) 0.063** (0.018) 1.497** (0.431) 1.602** (0.444)
DUALITY 0.221 (0.468) 0.402 (0.470) 3.377 (6.739) 5.709 (6.762) 0.211 (0.462) 0.204 (0.472) 0.055 (0.039) 0.043 (0.039) 0.920 (0.925) 0.815 (0.944)
CAGE 0.0002 (0.036) 0.255* (0.132) 0.029 (0.522) 3.244* (1.908) 0.028 (0.035) 0.005 (0.133) 0.0006 (0.003) 0.018 (0.011) 0.004 (0.071) 0.134 (0.266)
CAGE2 0.002** (0.001) 0.028* (0.016) 0.0002 (0.001) 0.0001 (0.00009) 0.001 (0.002)
GENDER 0.022** (0.001) 0.234** (0.112) 0.024 (0.021) 0.312*** (0.003) 0.009 (0.812) 0.001 (0.004) 0.024 (0.036) 0.029** (0.003) 0.324*** (0.006) 0.456*** (0.016)
CEOT 0.104 (0.345) 0.083** (0.035) 1.321** (0.430) 0.915* (0.509) 0.031 (0.029) 0.056 (0.035) 0.007** (0.002) 0.007** (0.002) 0.040 (0.059) 0.004 (0.712)
CEOT2 0.0006 (0.002) 0.025 (0.034) 0.003 (0.002) 0.00009 (0.0002) 0.004 (0.004)
CEOPE 0.345** (0.021) 0.287 (0.263) 5.675 (3.823) 4.820 (3.790) 0.160 (0.262) 0.179 (0.264) 0.021 (0.022) 0.018 (0.022) 1.493** (0.525) 1.432** (0.529)
CEOTE 0.021 (0.031) 0.008 (0.031) 0.289 (0.445) 0.133 (0.449) 0.005 (0.030) 0.003 (0.031) 0.0006 (0.002) 0.001 (0.002) 0.075 (0.061) 0.070 (0.062)
BUSY 0.016 (0.042) 0.013 (0.041) 0.432 (0.606) 0.468 (0.598) 0.023 (0.041) 0.024 (0.041) 0.003 (0.003) 0.003 (0.003) 0.001 (0.083) 0.004 (0.083)
FS 0.989*** (0.224) 1.013*** (0.222) 14.910*** (3.231) 15.386*** (3.204) 0.276 (0.221) 0.305 (0.223) 0.038** (0.018) 0.038** (0.018) 1.374** (0.444) 1.428** (0.447)
FAGE 0.914 (0.659) 0.848 (0.700) 13.723 (9.483) 11.071 (10.067) 1.289* (0.651) 0.963 (0.702) 0.014 (0.054) 0.024 (0.058) 2.059 (1.302) 1.584 (1.406)
DG 1.155*** (0.316) 1.074** (0.315) 22.868*** (4.550) 21.571*** (4.530) 0.713** (0.312) 0.671** (0.316) 0.074** (0.026) 0.070** (0.026) 1.914** (0.625) 1.807** (0.633)
ETA 9.245*** (1.864) 8.955*** (1.902) 108.78*** (26.790) 107.92*** (27.342) 1.656 (1.840) 2.191 (1.909) 0.147 (0.155) 0.104 (0.160) 12.792** (3.680) 13.320** (3.820)
Constant 25.626*** (4.977) 33.205*** (6.014) 381.714*** (71.537) 489.080*** (86.455) 0.517 (4.913) 1.976 (6.036) 1.196** (0.414) 1.618** (0.506) 32.803** (9.828) 39.521** (12.081)
LM Test x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) =
2.23 (0.0000) 0.00 (0.0000) 32.21 (0.0000) 0.00 (0.0000) 6.75 (0.0000) 0 .00 (0.0000) 61.21 (0.0000) 0.00 (0.0000) 3.40 (0.0326) 0.00 (0.0000)
Hausman Test x 2(12) = x 2(12) = x 2(12) = x 2(12) = x 2(12) = x 2(12) = x 2(12) = x 2(12) = x 2(12) = x 2(12) =
80.10 (0.0000) 273.04 (0.0000) 10.41 (0.0004) 78.34 (0.0000) 10.96 (0.0044) 19.41 (0.0000) 7.99 (0.0007) 58.14 (0.0000) 47.14 (0.0000) 205.05 (0.0000)
F-Test F (14,94) = F (14,92) = F (14,94) = F (14, 92) = F (14,94) = F (14, 92) = F (14,94) = F (14, 92) = F (14,94) = F (14, 92) =
8.31 (0.0000) 7.37 (0.0000) 7.95 (0.0000) 7.95 (0.00000) 9.45 (0.0000) 8.55 (0.0000) 13.70 (0.0000) 12.81 (0.0000) 5.26 (0.0000) 5.32 (0.0000)
N 120 120 120 120 120 120 120 120 120 120
Adj-R2 0.1275 0.1145 0.0127 0.0067 0.2256 0.1925 0.2311 0.2939 0.0585 0.0478

Notes: We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are reported in parentheses. *, **and ***show the
10%, 5% and 1% significance level respectively

sector banks)
Bank

Table 7.

results for private

effect estimation
performance (fixed
and bank
CEO Characteristics
performance
 MAJ

banks)
and bank
Table 8.

results for large

effect estimation
performance (fixed
CEO Characteristics
ROA ROE NIM PPR NPLR
Variable I II I II I II I II I II

FE 0.044 (0.089) 0.054 (0.091) 0.592 (1.742) 0.425 (1.764) 0.145 (0.116) 0.112 (0.105) 0.001 (0.008) 0.0006 (0.008) 0.601* (0.341) 0.616* (0.343)
DUALITY 0.397** (0.135) 0.385** (0.139) 6.047** (2.628) 5.459** (2.673) 0.247 (0.175) 0.236 (0.160) 0.025* (0.013) 0.025** (0.012) 1.518** (0.515) 1.403** (0.519)
CAGE 0.013 (0.010) 0.009 (0.148) 0.019 (0.207) 3.890 (2.841) 0.012 (0.013) 0.614** (0.170) 0.0002 (0.001) 0.042** (0.013) 0.058 (0.040) 0.970* (0.552)
CAGE2 0.0002 (0.005) 0.040 (0.029) 0.006*** (0.001) 0.004** (0.0001) 0.010* (0.005)
GENDER 0.031 (0.136) 0.065 (0.149) 1.969 (2.654) 1.088 (2.875) 0.251 (0.176) 0.045 (0.172) 0.034** (0.013) 0.014 (0.013) 1.166** (0.520) 0.861 (0.559)
CEOT 0.017 (0.015) 0.037 (0.032) 0.063 (0.291) 0.332 (0.632) 0.071*** (0.019) 0.127** (0.037) 0.002* (0.001) 0.006** (0.002) 0.103* (0.057) 0.056 (0.122)
CEOT2 0.0008 (0.001) 0.033 (0.031) 0.0006 (0.001) 0.00005 (0.0001) 0.006 (0.006)
CEOPE 0.110 (0.086) 0.115 (0.091) 0.918 (1.679) 0.239 (1.753) 0.222** (0.111) 0.104 (0.104) 0.017** (0.008) 0.009 (0.008) 0.539 (0.329) 0.356 (0.340)
CEOTE 0.006 (0.012) 0.007 (0.014) 0.220 (0.232) 0.009 (0.280) 0.0001 (0.015) 0.036** (0.016) 0.002* (0.001) 0.0003 (0.001) 0.056 (0.045) 0.0006 (0.054)
BUSY 0.032 (0.081) 0.026 (0.085) 0.101 (1.582) 0.537 (1.646) 0.321** (0.105) 0.269** (0.098) 0.006 (0.007) 0.002 (0.007) 0.414 (0.310) 0.558* (0.320)
FS 0.158 (0.104) 0.158 (0.105) 2.959 (2.031) 2.806 (2.033) 0.145 (0.135) 0.124 (0.121) 0.026** (0.010) 0.024** (0.009) 0.975** (0.398) 0.936** (0.395)
FAGE 0.657*** (0.122) 0.645*** (0.124) 6.114** (2.366) 6.212** (2.387) 0.083 (0.157) 0.005 (0.143) 0.054*** (0.011) 0.04*** (0.011) 2.476*** (0.464) 2.532*** (0.464)
DG 1.265** (0.568) 1.298** (0.577) 20.576* (11.012) 19.504* (11.072) 1.571** (0.733) 1.893** (0.663) 0.125** (0.055) 0.147** (0.051) 0.279 (2.161) 0.073 (2.152)
ETA 25.339*** (3.632) 25.375*** (3.820) 395.62*** (70.394) 366.30*** (73.300) 2.814 (4.691) 6.782 (4.389) 0.977** (0.355) 1.245*** (0.341) 86.973*** (13.8140) 79.600*** (14.251)
Constant 8.627** (3.181) 7.948 (4.876) 113.678* (61.658) 209.313** (93.559) 0.238 (4.108) 16.289** (5.603) 0.241 (0.311) 1.328** (0.435) 31.634** (12.099) 57.155** (18.190)
LM Test x 2(1) = 0.00 (0.000) x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) =
0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000)
Hausman Test x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) =
25.66 (0.0120) 21.80 (0.0056) 36.99 (0.0002) 36.42 (0.0005) 15.16 (0.0032) 17.26 (0.0399) 16.26 (0.0079) 24.71 (0.0163) 28.28 (0.0050) 32.80 (0.0018)
F-Test F (7, 76) = F (7, 74) = F (7,76) =7.73 (0.0000) F (7, 74) = F (7, 76) = F (7, 74) = F (7, 76) = F (7, 74) = F (7,76) = F (7, 74) =
4.03 (0.0008) 3.92 (0.0011) 7.86 (0.0000) 2.27 (0.0376) 1.90 (0.008) 2.65 (0.0165) 3.27 (0.0044) 3.77 (0.0015) 4.22 (0.0006)
N 96 96 96 96 96 96 96 96 96 96
Adj-R2 0.7579 0.7595 0.5272 0.5128 0.6412 0.7292 0.7728 0.8058 0.6442 0.6224

Notes: We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are reported in parentheses. *, **and ***show the
10%, 5% and 1% significance level respectively
 ROA ROE NIM PPR NPLR
Variable I II I II I II I II I II

FE 0.875*** (0.213) 0.964*** (0.238) 12.903*** (3.058) 14.125*** (3.428) 0.373 (0.242) 0.527* (0.269) 0.069** (0.024) 0.065** (0.027) 1.487** ( 0.503) 1.494** (0.562)
DUALITY 0.344 (0.238) 0.315 (0.241) 4.535 (3.408) 4.204 (3.459) 0.341 (0.270) 0.316 (0.271) 0.021 (0.027) 0.020 (0.027) 1.488** (0.561) 1.518*** (0.567)
CAGE 0.103** (0.034) 0.037 (0.149) 1.693** (0.497) 1.564 (2.140) 0.080** (0.039) 0.261 (0.168) 0.006* (0.003) 0.002 (0.017) 0.377*** (0.081) 0.771** (0.351)
CAGE2 0.0006 (0.001) 0.001 (0.194) 0.001 (0.001) 0.00008 (0.0001) 0.003 (0.003)
GENDER 0.019 (0.021) 0.203** (0.031) 0.963*** (0.032) 0.881*** (0.085) 1.256*** (0.004) 0.041** (0.007) 0.063** (0.009) 0.098** (0.002) 0.423*** (0.011) 0.654*** (0.018)
CEOT 0.184*** (0.029) 0.116** (0.070) 1.976*** (0.422) 1.216 (1.101) 0.102** (0.033) 0.053 (0.079) 0.014*** (0.003) 0.014* (0.008) 0.270** (0.069) 0.359** (0.167)
CEOT2 0.007 (0.007) 0.088 (0.104) 0.007 (0.008) 0.0001 (0.0008) 0.006 (0.017)
CEOPE 0.084 (0.189) 0.089 (0.193) 0.843 (2.717) 0.662 (2.774) 0.123 (0.215) 0.071 (0.217) 0.032 (0.021) 0.030 (0.022) 1.493** (0.447) 1.434** (0.455)
CEOTE 0.106** (0.031) 0.106** (0.322) 1.594** (0.456) 1.606** (0.462) 0.063* (0.036) 0.067* (0.036) 0.005 (0.003) 0.005 (0.003) 0.332*** (0.075) 0.338*** (0.075)
BUSY 0.656** (0.246) 0.592** (0.287) 11.079** (3.533) 10.973** (4.121) 0.348 (0.280) 0.166 (0.323) 0.011 (0.028) 0.002 (0.032) 1.420** (0.582) 1.811** (0.676)
FS 0.024 (0.187) 0.032 (0.190) 0.832 (2.680) 1.028 (2.730) 0.612** (0.212) 0.660* * (0.214) 0.012 (0.021) 0.014 (0.021) 0.795* (0.441) 0.841* (0.447)
FAGE 0.250* (0.150) 0.235 (0.151) 1.794 (2.147) 1.640 (2.174) 0.733** (0.170) 0.727*** (0.170) 0.018 (0.017) 0.018 (0.017) 1.040** (0.353) 1.065** (0.356)
DG 1.847** (0.548) 1.956** (0.563) 35.061*** (7.847) 36.477*** (80.090) 1.289** (0.623) 1.132* (0.635) 0.114* (0.062) 0.111* (0.064) 3.633** (1.292) 3.600** (1.3270)
ETA 4.560** (1.481) 4.081** (1.600) 68.687** (21.200) 65.244** (22.968) 4.099** (1.683) 4.459** (1.804) 0.341** (0.168) 0.313* (0.182) 9.359** (3.492) 10.929** (3.767)
Constant 0.233 (5.148) 1.689 (6.075) 7.323 (73.684) 1.651 (87.200) 20.364** (5.851) 17.087** (6.849) 0.345 (0.584) 0.158 (0.692) 13.848 (12.139) 5.059 (14.304)
LM Test x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) =
0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000)
Hausman Test x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) =
11.27 (0.0042) 16.86 (0.0020) 16.56 (0.0012) 16.14 (0.0010) 2.25 (0.0099) 2.60 (0.0097) 230.00 (0.0000) 13.84 (0.0031) 11.43 (0.0040) 12.43 (0.0041)
F-Test F (7,77) = F (7,75) = F (7,77) = F (7,75) = F (7,77) = F (7,75) = F (7,77) = F (7,75) = F (7,77) = F (7,75) =
2.96 (0.0084) 2.94 (0.0088) 3.62 (0.0020) 3.58 (0.0022) 4.43 (0.0087) 4.48 (0.0083) 2.37 (0.0303) 2.24 (0.0404) 4.57 (0.0003) 4.61 (0.0002)
N 96 96 96 96 96 96 96 96 96 96
Adj-R2 0.4879 0.4937 0.4158 0.5335 0.4939 0.5073 0.4070 0.4126 0.4441 0.4425

Notes: We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are reported in parentheses. *, **and ***show the
10%, 5% and 1% significance level respectively

banks)
Bank

Table 9.
CEO Characteristics

effect estimation
performance (fixed
and bank

results for small

performance
MAJ be possible in case of larger boards as there may be more interest groups representing
different stakeholders on the board. Larger boards can check the discretion of the CEO.
Hence in line with the earlier argument, we divide the banks based on board size as large
boards and small board banks to investigate the impact of CEO characteristics on the banks
with large and small board sizes.
Tables 10 and 11 shows the regression results of the impact of various CEO
characteristics on the performance of large and small board sized banks. The overall result
indicates that CEO duality leads to higher performance in the small board banks, whereas it
is insignificant in explaining the performance of large board banks. Male CEOs are leading
to high performance in large board size banks, and it is insignificant for small board banks.
The CEO tenure is positively affecting the performance of the large as well as small board
banks. Additionally, it shows the curvilinear relationship in both cases. CEO prior
experience on the CEO specific job helps in increasing the NIM of large board banks. The
busyness of the CEO is adversely affecting the health of the large board banks. This implies
that for banks having large as well as small board size, the CEO characteristics retain their
significance in determining the performance of banks.

5.5 Endogeneity concern

The endogeneity is common, as pointed out by Hermalin and Weisbach (1998, 2003).
According to Lopez-Gutiérrez et al. (2015) and Tran and Le (2017), we estimate equation (1)
and (2) using two-step System-GMM (Generalized Method of Moments), which are reliable in
the presence of heteroscedasticity and autocorrelation (Arellano and Bover, 1995; Blundell
and Bond, 1998). The panel data deals with heterogeneity by taking the first differences and
hence eliminates the individual effect making the estimations unbiased. It also tackles the
problem of endogeneity. Particularly, it includes the lagged independent variables as
instruments, which allows for additional instruments by taking advantage of the conditions
of orthogonality existing among the lags in explanatory variables (Arellano and Bond,
1991). We apply the Arellano–Bond test for autocorrelation of the disturbance term e i,t,
Sargan tests for over-identifying restrictions, and Wald test for the joint significance of the
estimated coefficients for all the variables. We present system estimator regression results
in Table 12. The results reveal that CEO professional financial education, CEO duality, CEO
tenure and CEO gender have a positive while the CEO age bears a negative and significant
relationship with bank performance. The overall results of the system estimator indicate
that the analysis of CEO characteristics is relevant to the Indian banking sector and find
similar results confirming the results of fixed-effect regression discussed earlier.

5.6 Performance index as the dependent variable

We have made a performance index by using the various performance measures i.e. ROA,
ROE, NIM and PPR for a comprehensive analysis of the results by using principal
component analysis. Table 13 shows a fixed effect and GMM Estimation results of the
performance index as the dependent variable for the whole sample. The results reveal that
CEO duality and total career experience enhances the performance of the banks. The impact
of other bank-specific variables is more or less consistent with the whole sample results.

6. Conclusions
This study investigates the relationship between CEO characteristics and bank performance
in India and is stimulated by the existing literature suggesting the relationship between
executives’ demographic and experience-related characteristics and performance. For
example, gender-based differences may bear a significant impact on the CEO working
 ROA ROE NIM PPR NPLR
Variable I II I II I II I II I II

FE 0.075 (0.895) 0.065 (0.087) 2.301 (1.499) 2.193 (1.488) 0.064 (0.084) 0.082 (0.081) 0.015** (0.007) 0.017** (0.007) 0.099 (0.298) 0.079 (0.298)
DUALITY 0.144 (0.104) 0.120 (0.102) 0.621 (1.757) 0.312 (1.757) 0.019 (0.098) 0.004 (0.095) 0.002 (0.008) 0.001 (0.008) 0.148 (0.350) 0.109 (0.352)
CAGE 0.008 (0.012) 0.119 (0.109) 0.167 (0.205) 1.538 (1.874) 0.008 (0.011) 0.245** (0.102) 0.0009 (0.001) 0.017** (0.008) 0.051 (0.040) 0.131 (0.376)
CAGE2 0.001 (0.001) 0.016 (2.536) 0.002** (0.001) 0.0001* (0.00008) 0.001 (0.003)
GENDER 0.365** (0.148) 0.279* (0.148) 3.621 (2.482) 2.670 (0.545) 0.153 (0.139) 0.050 (0.138) 0.048*** (0.012) 0.034** (0.012) 0.365 (0.494) 0.199 (0.508)
CEOT 0.077*** (0.014) 0.145*** (0.031) 0.873*** (0.244) 1.626** (0.025) 0.065*** (0.013) 0.146*** (0.029) 0.004*** (0.001) 0.015*** (0.002) 0.145** (0.048) 0.276** (0.109)
CEOT2 0.004** (0.001) 0.049 (1.497) 0.003** (0.001) 0.005*** (0.0001) 0.008 (0.005)
CEOPE 0.038 (0.090) 0.048 (0.087) 1.122 (1.508) 1.237** (0.206) 0.175 ** (0.084) 0.165** (0.081) 0.007 (0.007) 0.006 (0.007) 0.142 (0.300) 0.156 (0.300)
CEOTE 0.007 (0.011) 0.011 (0.012) 0.088 (0.200) 0.141 (0.206) 0.015 (0.011) 0.023** (0.011) 0.00005 (0.001) 0.0004 (0.0009) 0.040 (0.039) 0.046 (0.041)
BUSY 0.117 (0.091) 0.168* (0.092) 2.317 (1.529) 2.859* (1.581) 0.277** (0.086) 0.359*** (0.086) 0.018* * (0.007) 0.028*** (0.007) 0.572* (0.304) 0.673** (0.317)
FS 0.019 (0.054) 0.039 (0.058) 0.115 (0.915) 0.828 (0.995) 0.036 (0.051) 0.056 (0.054) 0.012** (0.004) 0.013** (0.004) 0.257 (0.182) 0.158 (0.199)
FAGE 0.081 (0.127) 0.132 (0.127) 2.116 (2.131) 1.469 (2.174) 0.180 (0.119) 0.125 (0.118) 0.026** (0.010) 0.023** (0.010) 0.475 (0.424) 0.555 (0.436)
DG 0.691* (0.358) 0.718** (0.348) 11.686* (5.999) 12.023** (5.948) 0.336 (0.337) 0.315 (0.324) 0.034 (0.030) 0.033 (0.028) 3.086** (1.195) 3.130** (1.193)
ETA 0.831 (1.471) 0.663 (1.484) 17.579 (24.628) 14.7576 (25.349) 1.225 (1.384) 0.087 (1.383) 0.370* * (0.125) 0.464*** (0.120) 6.430 (4.906) 6.318 (5.085)
Constant 1.505 (1.883) 3.189 (3.000) 7.449 (31.531) 17.081 (51.235) 4.565** (1.773) 1.758 (2.795) 0.072 (0.160) 0.554** (0.244) 5.399 (6.282) 7.315 (10.278)
LM Test x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) =
0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (00000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000)
Hausman Test x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) = x 2(12) = x 2(13) =
193.86 (0.0000) 746.18 (0.0000) 3668.52 (0.0000) 414.55 (0.0000) 8.69 (0.0072) 11.65 (0.0063) 22.69 (0.0305) 57.50 (0.0000) 214.83 (0.0000) 468.55 (0.0000)
F-Test F (7, 124) = F (7, 122) = F (7, 124) = F (7,122) = F (7, 124) = F (7, 122) = F (7, 124) = F (7, 122) = F (7, 124) = F (7, 122) =
11.29 (0.0000) 12.71 (0.0000) 16.00 (0.0000) 16.71 (0.0000) 4.44 (0.0194) 4.96 (0.0066) 8.00 (0.0000) 9.10 (0.0000) 11.72 (0.0000) 12.04 (0.0000)
N 144 144 144 144 144 144 144 144 144 144
Adj-R2 0.2393 0.2418 0.0442 0.0432 0.4828 0.5102 0.5337 0.5703 0.1827 0.1741

Notes: We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are reported in parentheses. *, **and ***show the
10%, 5% and 1% significance level respectively

board size banks)

Bank

results for large

CEO Characteristics

effect estimation
performance (fixed
and bank
Table 10.
performance
 MAJ

and bank
Table 11.

results for small

effect estimation

board size banks)

performance (fixed
CEO Characteristics
ROA ROE NIM PPR NPLR
Variable I II I II I II I II I II

FE 0.032 (0.137) 0.078 (0.134) 1.489 (2.163) 0.444 (2.188) 0.184 (0.159) 0.207 (0.163) 0.021 (0.014) 0.013 (0.014) 0.276 (0.392) 0.560 (0.386)
DUALITY 0.194 (0.134) 0.212 (0.128) 7.092** (2.106) 7.251** (2.093) 0.048 (0.155) 0.069 (0.156) 0.004 (0.013) 0.003 (0.013) 0.744* (0.382) 0.794** (0.370)
CAGE 0.005 (0.025) 0.292** (0.114) 0.278 (0.398) 2.479 (1.864) 0.045 (0.029) 0.201 (0.139) 0.002 (0.002) 0.016 (0.012) 0.168** (0.072) 0.611* (0.329)
CAGE2 0.002** (0.001) 0.026 (0.017) 0.001 (0.001) 0.0001 (0.0001) 0.007** (0.003)
GENDER 0.020 (0.310) 0.004 (0.296) 0.590 (4.872) 0.812 (4.831) 0.428 (0.358) 0.388 (0.360) 0.018 (0.032) 0.019 (0.031) 0.059 (0.884) 0.130 (0.854)
CEOT 0.079*** (0.020) 0.188*** (0.046) 0.965** (0.327) 2.013* * (0.755) 0.128*** (0.024) 0.157** (0.056) 0.006** (0.002) 0.016** (0.004) 0.256*** (0.059) 0.523*** (0.133)
CEOT2 0.007** (0.002) 0.073 (0.044) 0.001 (0.003) 0.0006** (0.0002) 0.018** (0.007)
CEOPE 0.091 (0.124) 0.068 (0.119) 3.026 (1.954) 2.820 (1.945) 0.070 (0.143) 0.092 (0.145) 0.010 (0.012) 0.009 (0.012) 0.328 (0.354) 0.390 (0.343)
CEOTE 0.0006 (0.021) 0.010 (0.020) 0.005 (0.332) 0.082 (0.331) 0.037 (0.024) 0.034 (0.024) 0.002 (0.002) 0.003 (0.002) 0.083 (0.060) 0.107* (0.058)
BUSY 0.017 (0.052) 0.026 (0.519) 0.644 (0.820) 0.551 (0.847) 0.031 (0.060) 0.051 (0.063) 0.001 (0.005) 0.002 (0.005) 0.135 (0.148) 0.117 (0.149)
FS 0.260** (0.078) 0.149* (0.079) 4.625*** (1.231) 3.571** (1.302) 0.256** (0.090) 0.265** (0.097) 0.023** (0.008) 0.032*** (0.008) 1.120*** (0.223) 0.838*** (0.230)
FAGE 0.236** (0.106) 0.206** (0.103) 0.259 (1.670) 0.559 (1.694) 0.209* (0.122) 0.181 (0.126) 0.028* * (0.011) 0.025** (0.011) 0.050 (0.303) 0.019 (0.299)
DG 1.065** (0.413) 0.717* (0.402) 17.767** (1.231) 14.490* (6.561) 0.359 (0.476) 0.298 (0.489) 0.055 (0.042) 0.029 (0.042) 2.155* (1.175) 1.269 (1.159)
ETA 7.812*** (1.404) 6.575** (1.371)126.336*** (22.020)114.697* ** (22.354) 2.604 (1.620) 2.836* (1.668) 0.322** (0.145) 0.228 (0.145) 16.650*** (3.995) 13.499** (3.951)
Constant 8.332*** (2.265)12.829*** (3.455) 116.067** (35.524) 156.927** (56.329)9.7763*** (2.613) 5.731 (4.024) 0.420* (0.234) 0.201 (0.367) 21.479** (6.445) 33.618** (9.957)
LM Test x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) = x 2(1) =
0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000) 0.00 (0.0000)
Hausman x 2(12) = x 2(14) = x 2(12) = x 2(14) = x 2(12) = x 2(14) = x 2(12) = x 2(14) = x 2(12) = x 2(14) =
Test 8.94 (0.0070) 20.06 (0.0012) 43.33 (0.0000) 57.42 (0.0000) 13.56 (0.0032) 12.15 (0.0051) 16.77 (0.0015) 14.17 (0.0036) 95.40 (0.0000) 139.87 (0.0000)
F-Test F (7, 124) = F (7, 122) = F (7, 124) = F (7, 122) = F (7, 124) = F (7, 122) =1.20 F (7, 124) = F (7, 122) =2.67 F (7, 124) = F (7, 122) =10.73
2.57 (0.0167) 3.58 (0.0015) 7.14 (0.0000) 7.93 (0.0000) 6.24 (0.0028) (0.0030) 1.94 (0.0069) (0.0132) 8.80 (0.0000) (0.0000)
N 144 144 144 144 144 144 144 144 144 144
Adj-R2 0.5739 0.5798 0.4266 0.3997 0.4590 0.4658 0.4617 0.4617 0.4293 0.3952

Notes: We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are reported in parentheses. *, **and ***show the
10%, 5% and 1% significance level respectively
 ROA ROE NIM Pre-provision profit ratio(PPR) NPLR
Variable I II I II I II I II I II

L. 0.160** (0.059) 0.116* (0.064) 0.052 (0.041) 0.087 (0.058) 0.380*** (0.067) 0.348*** (0.060) 0.118** (0.047) 0.079 (0.051) 0.476*** (0.056) 0.451*** (0.056)
FE 0.489*** (0.055) 0.486*** (0.066) 8.116*** (1.316) 8.379*** (1.471) 0.136** (0.050) 0.160** (0.048) 0.015** (0.004) 0.016** (0.004) 0.943*** (0.142) 0.965*** (0.143)
DUALITY 0.642*** (0.068) 0.578*** (0.059) 12.481*** (1.305) 12.635*** (1.309) 0.087** (0.039) 0.055 (0.035) 0.001 (0.004) 0.001 (0.004) 1.940*** (0.153) 1.976*** (0.163)
CAGE 0.019** (0.007) 0.378*** (0.097) 0.009 (0.085) 4.568** (1.613) 0.004 (0.005) 0.099* (0.055) 0.0008** (0.0004) 0.012** (0.003) 0.026** (0.013) 0.066 (0.177)
CAGE2 0.003*** (0.0009) 0.045** (0.015) 0.0009* (0.0005) 0.0001** (0.00003) 0.0009 (0.001)
GENDER 0.461*** (0.105) 0.534*** (0.084) 6.413** (2.404) 7.658** (2.518) 0.074 (0.059) 0.084 (0.059) 0.032*** (0.005) 0.039*** (0.005) 0.903 * ** (0.223) 0.874*** (0.231)
CEOT 0.029** (0.011) 0.004 (0.024) 0.477** (0.231) 0.790** (0.379) 0.020** (0.008) 0.004 (0.0127) 0.001* (0.0007) 0.003** (0.001) 0.062* * (0.019) 0.037 (0.046)
CEOT2 0.002 (0.002) 0.127** (0.048) 0.003* * (0.001) 0.0005** (0.0001) 0.013** (0.005)
CEOPE 0.004 (0.081) 0.018 (0.076) 2.539 (1.833) 3.093* (1.814) 0.030 (0.033) 0.021 (0.036) 0.003 (0.005) 0.007 (0.004) 0.511** (0.225) 0.490** (0.223)
CEOTE 0.005 (0.007) 0.008 (0.006) 0.259** (0.136) 0.109 (0.114) 0.002 (0.005) 0.004 (0.004) 0.002*** (0.0005) 0.001*** (0.0004) 0.034*** (0.008) 0.030*** (0.007)
BUSY 0.012 (0.008) 0.003 (0.013) 0.233 (0.165) 0.556*** (0.136) 0.004 (0.130) 0.0002 (0.010) 0.001 (0.001) 0.0003 (0.001) 0.013 (0.034) 0.024 (0.042)
FS 1.053*** (0.096) 0.968*** (0.114) 28.334*** (2.450) 27.374* ** (2.811) 0.971*** (0.076) 0.970 *** (0.076) 0.054*** (0.006) 0.050*** (0.006) 2.780*** (0.289) 2.566*** (0.331)
FAGE 1.6218** (0.579) 1.411** (0.672) 39.267*** (8.727) 14.680 (14.655) 3.064*** (0.289) 2.611*** (0.400) 0.188*** (0.024) 0.101** (0.041) 3.908** (1.594) 0.435 (2.384)
DG 0.796*** (0.183) 0.771*** (0.194) 29.283*** (2.151) 26.806*** (2.523) 0.275** (0.123) 0.282* * (0.121) 0.079*** (0.012) 0.066*** (0.013) 2.279*** (0.383) 2.231*** (0.362)
ETA 3.803*** (0.801) 3.925*** (0.854) 209.667*** (18.735) 204.274* * * (22.716) 0.407 (1.405) 0.124 (1.446) 0.297*** (0.105) 0.380*** (0.107) 17.132*** (4.475) 18.177*** (4.591)
Constant 21.535*** (2.399) 30.188*** (3.234) 618.79*** (45.042) 813.427* * * (60.774) 16.044*** (1.573) 15.5647* ** (2.464) 0.720*** (0.129) 1.318*** (0.180) 61.772* ** (5.575) 68.110*** (8.175)
N 216 216 216 216 216 216 216 216 216 216
Number of banks 36 36 36 36 36 36 36 36 36 36
Wald-test x 2(13) = x 2(15) = x 2(13) = x 2(15) = x 2(13) = x 2(15) = x 2(13) = x 2(15) = x 2(13) = x 2(15) =
1402.37 (0.0000) 3359.48 (0.0000) 1301.84 (0.0000) 3641.09 (0.0000) 1500.29 (0.0000) 4019.34 (0.0000) 644.30 (0.0000) 3178.34 (0.0000) 22820.97 (0.0000) 18226.39 (0.0000)
Sargan test 0.1465 0.0965 0.0604 0.0750 0.2851 0.2696 0.0959 0.0934 0.0680 0.0703
(p-value)
AB test AR(1) 0.0621 0.0535 0.1039 0.2051 0.7964 0.9877 0.1357 0.2484 0.3204 0.1144
(p-value)
AB test AR(2) 0.1003 0.2359 0.0853 0.1503 0.7580 0.5577 0.0997 0.1144 0.5315 0.4845
(p-value)

Notes: The table reports result of the GMM estimations of the effects of CEO characteristics on bank profitability of all banks. The dependent variable is ROA, ROE,
NIM, pre-provision profit ratio, and NPLR. For the definition of the variables see Table 1. The total sample includes 288 observations from 36 banks. The period
covers the years 2010 to 2017. Standard errors are in brackets. Coefficients that are significantly different from zero at the 1%, 5%, and 10% level are marked with
***, **, and *, respectively. The Sargan test is the test for over-identifying restrictions in GMM dynamic model estimation. AB test AR (1) and AR (2) refer to the
Arellano–Bond test that average auto-covariance in residuals of order 1 respectively of order 2 is 0 (H0: no autocorrelation); p-values are in brackets

performance (GMM
Bank

the whole sample)

and bank
CEO Characteristics

estimation results for

Table 12.
performance
 MAJ

and bank
Table 13.

index as the
the performance
effect and GMM
performance (fixed

dependent variable
CEO Characteristics

for the whole sample)

estimation results for
Variables Fixed effect estimation GMM estimation

L1 0.013(0.040) 0.018(0.040)
FE 0.008(0.006) 0.008(0.007) 0.004(0.003) 0.006(0.003)
DUALITY 0.013(0.006)** 0.012(0.006)* 0.032(0.005)*** 0.031(0.005)***
CAGE 0.002(0.0008)** 0.010(0.006) 0.003(0.0008)*** 0.022(0.006)**
CAGE2 0.187(0.168) 0.484(0.163)**
GENDER 0.009(0.011) 0.007(0.011) 0.004(0.006) 0.005(0.006)
CEOT 0.0008(0.001) 0.0006(0.001) 0.0008(0.0009) 0.0009(0.001)
CEOT2 0.0002(0.0001)* 0.0005(0.0001)**
CEOPE 0.006(0.006) 0.006(0.006) 0.004(0.008) 0.002(0.008)
CEOTE 0.002(0.0007)** 0.002(0.0007)** 0.001(0.0005)** 0.001(0.0004)***
BUSY 0.007(0.006) 0.007(0.006) 0.012(0.004)** 0.011(0.004)**
FS 0.040(0.007)*** 0.039(0.007)*** 0.081(0.011)*** 0.081(0.011)***
FAGE 0.077(0.038)** 0.043(0.043) 0.213(0.038)*** 0.132(0.047)**
DG 0.015(0.016) 0.011(0.016) 0.029(0.009)** 0.026(0.009)**
ETA 0.008(0.104) 0.017(0.105) 0.282(0.073)*** 0.318(0.074)***
Constant 0.953(0.175)*** 0.023(0.992) 1.595(0.194)*** 0.856(0.987)
LM Test x 2(1)=14.23(0.0023) x 2(1)=18.93(0.0043)
Hausman Test x 2(12)= 51.22 (0.0000) x 2(14)= 7.39(0.0000)
F-test F(35, 240)= 2.02 (0.0011) F(35, 238) =2.07 (0.0008)
Adj R2 0.0004 0.0064
N 216 216 216 216
No. of banks 36 36 36 36
Wald Test x 2(20)= 462.75 (0.0000) x 2(20)= 5474.03 (0.0000)
Sargan Test (p-value) 0.0663 0.0502
AB Test AR(1) (p-value) 0.0601 0.1201
AB Test AR(2) (p-value) 0.7177 0.5855

Notes: We estimate all models controlling for heteroscedasticity and firm-level clustering. Standard errors are reported in parentheses. *, **and ***show the
10%, 5% and 1% significance level respectively
approach. Furthermore, the previous studies additionally reveal that CEO age, experience, Bank
busyness, etc. may affect executives’ ability to supervise. performance
In this study, we firstly evidence regarding the impact of CEO characteristics on
the performance of 36 banks functioning in the Indian banking sector from 2009–
2010 to 2016–2017. For achieving this objective, we estimate several data models
using the fixed effects estimation technique. We document that the CEOs of public
sector banks are appointed by the central government on the recommendation of the
Bank Board Bureau on the advice of RBI, whereas that of private banks is appointed
by the board of directors with the approval of RBI. On investigating the significance
level of CEO characteristics, we find a positive effect of CEO–Chairman duality (Peni,
2014) and CEO professional finance education on bank performance. The
concentration of decision-making power with the single individual is good for the
health of the Indian banks by improving the quality of business decisions and
reduces the delay in its implementation. Additionally, we find that the male CEO is
better able to contribute to the profitability of Indian banks. The female
representation on the top position is less, possibly due to the distrust in their
suitability in managing complex institutions like banks. Hiring CEOs who possess
prior CEO experience is beneficial for the Indian banks. Well experienced CEOs
improve the banks’ performance.
Although we have conducted several robustness tests, some limitations are likely to
be considered in interpreting the results conducted in this study. First, our sample
consists of public and private sector banks and thus, it may not apply to foreign banks
operating in India. Foreign banks are those banks that are registered in their home
countries under their native Companies Act and do not comply with the clause 49
listing agreement in India and their data availability is limited. Second, the data is hand
collected and is limited to the eight years only from 2009–10 to 2016–17 and hence the
longer-term effects of CEO characteristics on bank performance cannot be studied
based on this data. Due to limited data availability future studies can investigate other
characteristics variables not taken up by the present study for example CEO quality,
number of committee seats held by the CEO within the banks or outside the bank, CEO
nationality, CEO technical education in having an edge over competitors in this
technical world, CEO experience as the Chairman in the previous firm, marital status,
spouse income, number of children, etc.
Finally, our study has several implications. The central government should make
the selection procedure of the CEO more practical and market oriented. It should be
made open for professional experts rather than filling through promotions in the public
sector banks. The CEO tenure should be increased to provide stability and understand
the prevailing economic environment and make concrete decisions having far-reaching
effects. The extension of the CEO tenure or the reappointment of the CEOs should be
done on the basis of performance and merit of the last tenure. The track record,
professional expertise, and relevant experience should be considered while appointing
women CEOs. The pay packet of the CEOs of the public sector banks should be at par
with the market standards, and the multiple directorships for the CEOs should be
completely terminated so that they can exclusively concentrate on their current
assignment. The regulators should prefer to appoint the CEOs who have been the CEO
in their past careers. The policy regulators should again revisit the policy of splitting
the position of CEO and chairman in Indian banks. Our study ultimately concludes that
CEO characteristics play an important role in bank performance .
MAJ Note
1. Banks Board Bureau (BBB) is an autonomous body of the Government of India tasked to improve
the governance of Public Sector Banks, recommend the selection of chiefs of government-owned
banks and financial institutions and to help banks in developing strategies and capital raising
plans.

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Further reading
www.mca.gov.in/MinistryV2/companiesact2013.html (accessed 30 June 2019).
www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10397&Mode=0

About the authors

Neeraj Gupta has completed PhD from the Department of Humanities and Social Sciences, Indian
Institute of Technology Kharagpur in the area of Financial Economics. Currently, he is working as
Assistant Professor at Jaipuria Institute of Management, Indore, India. His areas of interest include
security analysis, corporate finance, business laws and derivatives. Neeraj Gupta is the
corresponding author and can be contacted at: neerajamity7@gmail.com
Prof Jitendra Mahakud is Professor of Economics and Finance at the Indian Institute of
Technology, Kharagpur. His areas of research and teaching include financial market and institution,
financial management, financial econometrics, macroeconomics and monetary economics.

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