The Effect of Board Independence and Audit Committee Effectiveness on the Financial Performance of Turkish Commercial Banks

Objectives This study examines whether board independence and audit committee effectiveness are associated with the financial performance of Turkish commercial banks. Material and Methods The analysis uses a balanced panel of 13 deposit banks over 2015-2024, producing 130 bank-year observations. Return on assets is the dependent variable. Board independence is measured as the proportion of independent directors, while audit committee effectiveness is measured through a composite index covering independence, financial expertise, meeting activity, and minimum committee size. Bank size and credit risk are included as controls. The empirical strategy applies descriptive statistics, cross-sectional dependence tests, second-generation cross-sectionally augmented Im-Pesaran-Shin (CIPS) unit root tests, the Hausman test, and a bank fixed-effects model with Driscoll-Kraay robust standard errors. Results Board independence and audit committee effectiveness have positive and statistically significant associations with return on assets. Bank size also contributes positively to performance, whereas credit risk has a negative and statistically significant association with performance. Conclusion The findings support agency-theory expectations that independent monitoring and effective audit oversight can improve profitability in emerging-market banking. The study also clarifies that the evidence should be interpreted as associational because of the small panel, possible omitted variables, and potential reverse causality.