The Relationship between the Characteristics of the Board of Directors and Performance of Companies with Reference to Yemeni Banks

Abstract

The study investigated the relationship between the board of directors’ characteristics and performance in the Yemeni banks. It aimed to identify and measure the variables of the board of directors’ characteristics, and then develop a model to measure such relationships. To achieve the study objectives, panel data of 10 Yemeni banks for the years 2000-2013 were used. The study also developed 13 independent variables related to characteristics of the board of directors and two dependent variables pertinent to finance. The study used multiple regression models to test this relationship. The econometric program (EVIEWS) was also used. The study results showed that there were positive relationships between the number of meetings, the dual role of CEOs, CEO and board members’ salaries and remuneration and their percentage of ownership, on the one hand, and between the ROE and ROA on the other. In addition, the results revealed a negative relationship between the board size, number of executive members, qualifications of the CEO, and the ROE and ROA. However, there were conflicting results of the relationships between the number of audit committee members and the ROE and ROA. Therefore, it was recommended that banks form effective structure of boards of directors with good characteristics that could have positive effect on performance. It was also recommended that the Central Bank of Yemen encourage banks to provide regular data on the BOD for researchers, and enhance the participation of women in the boards.

Keywords: Board of directors, Characteristics of the board of directors, Bank performance, ROE, ROA.