Board Structure Effect on Bank Liquidity Creation: Evidence from European Banks
This study examines the impact of board structure on bank’s liquidity creation for European banks operating in 19 countries over the period 2013 to 2017. I use independent directors, gender diversity, average age of board members, size of the board, and the number of meetings as the measurement of board structure. Moreover, I use two measures of liquidity creation –“cat fat” which measures the liquidity banks create on and off-balance sheet, and “can non-fat” which measure the liquidity creation from the balance sheet activities only. In this study, I use a panel data, and therefore, I present the results from OLS, fixed effects, and random effects models. The main findings of the study suggest that board structure has a significant effect on liquidity creation. I find that gender diversity, boards’ average age, and independent directors have a significant impact on liquidity creation. In contrast, the results suggest that number of board meetings, boards’ size, and the board system have no significant effect on banks’ liquidity creation.
Keywords - Board Structure, Liquidity Creation, Governance, Banking.