A Structural Equation Modeling Approach to Risky Behaviors and Board Characteristics on Bank Performance Using Profit Frontier Method in Banks Listed on the Tehran Stock Exchange
Keywords:
Board characteristics, risky behaviors, bank performance, profit frontier approach, structural equation modelingAbstract
This study aims to investigate the structural relationship between board characteristics, risky behaviors, and bank performance using the profit frontier approach in banks listed on the Tehran Stock Exchange. The research employed a quantitative, descriptive-correlational design. The statistical population included managers of public and private banks in Tehran, with 384 participants selected using Cochran's formula. Data were gathered via three tools: a risky behavior questionnaire, a performance checklist based on the profit frontier model, and a board characteristics inventory. Instrument reliability and validity were confirmed through confirmatory factor analysis, AVE, CR, and the Kolmogorov–Smirnov test. Data analysis was performed using Structural Equation Modeling (SEM) in SmartPLS. Results showed that board characteristics significantly and directly influenced both risky behaviors and bank performance. Risky behaviors also had a significant and positive effect on bank performance based on the profit frontier approach. All t-statistics exceeded the 1.96 threshold, and the overall model fit index was reported as 0.603, indicating a strong model fit. The findings underscore the critical role of board structure in shaping banks’ risk-taking behaviors and ultimate performance outcomes. When governed effectively, risk-taking can contribute positively to performance. The study highlights the necessity of integrating corporate governance and risk behavior frameworks in bank performance evaluations.
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