Board Composition and Non-Performing Loans among Commercial Banks in Tanzania

George Budotela, Goodluck Mmari, Nathaniel Towo
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Abstract

Objective – This paper investigates the effect of board composition on non-performing loans (NPLs) for a sample of 31 commercial banks in Tanzania.Design/methodology – A quantitative study methodology was employed using annual data covering the period of 2011-2020. The authors used a one-step generalised method of moments (GMM) approach to estimate the effect of board composition on the percentage growth of NPLs in Tanzania.Results – The paper concludes that the number of board members with financial expertise, the board size, the audit committee, and the presence of female directors significantly negatively impact the bank’s NPLs and hence aid in lowering the bank’s NPLs. In contrast, an increase in board size, lagged NPLs, credit committees, independent directors, board meetings, and advances in deposit ratio significantly increases the level of NPLs, which is consistent with the agency theory.Research Limitations/Implications – Inconsistencies in the reported variables from various databases during the study and afterwards, as well as a lack of data for some banks in specific years. Shareholders should actively establish good corporate governance in the commercial banks (CBs) they own to reduce NPLs at an acceptable rate of less than 5%. Also, the Central Banks of Tanzania should encourage CBs to implement effective corporate governance practices by enacting rules and regulations to reduce NPLs. To minimize loan losses, authorities should impose micro-prudential supervision on commercial banks’ lending behavior. Novelty/Originality – The paper includes bank size and ownership using a one-step difference and one-step system (GMM) approach to measure the effect, which is usually not the case with most studies.
坦桑尼亚商业银行董事会构成与不良贷款
目的:本文以坦桑尼亚31家商业银行为样本,调查董事会构成对不良贷款(NPLs)的影响。设计/方法-采用定量研究方法,使用2011-2020年期间的年度数据。作者使用一步广义矩量法(GMM)方法来估计董事会组成对坦桑尼亚不良贷款百分比增长的影响。结果-本文得出的结论是,具有金融专业知识的董事会成员数量、董事会规模、审计委员会和女性董事的存在对银行的不良贷款产生了显著的负面影响,从而有助于降低银行的不良贷款。相比之下,董事会规模的增加、滞后不良贷款、信贷委员会、独立董事、董事会会议和存款比率的提高显著增加了不良贷款水平,这与代理理论相一致。研究局限性/影响-研究期间和之后不同数据库中报告的变量不一致,以及某些银行在特定年份缺乏数据。股东应积极在其持有的商业银行建立良好的公司治理,以低于5%的可接受率减少不良贷款。此外,坦桑尼亚中央银行应通过颁布规则和条例来减少不良贷款,鼓励商业银行实施有效的公司治理做法。为了最大限度地减少贷款损失,当局应该对商业银行的贷款行为进行微观审慎监管。新颖性/原创性-本文包括银行规模和所有权,使用一步差异和一步系统(GMM)方法来衡量效果,这通常不是大多数研究的情况。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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