Influence of board and ownership structure on bank profitability: Evidence from South East Europe

Abstract

© 2014 The Authors. We investigate the impact of board and ownership structure on profitability of 74 commercial banks from four transition economies of South East Europe over the 2005–2010 period. We analyse this relation using Ordinary Least Squares regression analysis on an unbalanced panel data-set of 377 observations. We find negative and significant relationship between board size and bank profitability, while the proportion of independent directors on the board is negatively, but insignificantly related to bank profitability. Impact of ownership concentration on bank profitability is negative, but weak. We also find that privately held domestic banks outperform state-owned and foreign banks. Important factors influencing bank profitability in South East Europe are also bank size and bank capitalisation.