What is PSM

The chapter deals with how the busyness of independent directors moderates their influence on the performance of banking firms in India. Using a two-step system generalized method of moments on an unbalanced panel of 42 Indian banks during 2005-2018, the chapter indicates that bank boards with a higher proportion of busy directors experience higher performance up to a threshold level of 20 percent, favoring the reputational hypothesis. However, the bank's performance gets deteriorated after more than 20 percent of independent directors are busy. It thereby produces evidence of an inverted U-shaped relation, favoring the busyness hypothesis. Further, the results display that busy independent directors who are not participating in at least 75 percent of board meetings exert a detrimental impact on bank performance. The findings of the chapter are strengthened by the alternative econometric method of propensity score matching. The findings of this chapter would be of great interest to policymakers to initiate effective governance provisions related to the busyness of independent directors.