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This paper aims to reduce the knowledge gap by using a large sample and different regressions while controlling the endogeneity and causality issues.

This study used the ordinary least square (OLS) and two stage least squares (2SLS) regressions to control the endogeneity and causality problems; this estimation strategy allows for comparison of both estimates to identify any inconsistency and biases in the parameters.

General speaking, this study found that board independence negatively affected firm performance based on Tobin’s Q only and the relationship between the two variables ran from board independence to firm performance but not vice versa.

The current independent directors are not adding value to Kuwait’s listed firms. Some directors who represent large shareholders and the conflict between large shareholders and small shareholders could affect the role of independent directors in Kuwait. To best of the researchers’ knowledge, this study is the first to consider board independent after controlling the issues of endogeneity and causality in Kuwait; thus, the results could be useful for Kuwaiti firms, regulators and policymakers.

This study aims to examine the relationship between board composition (i.e. non‐executive directors, family directors, role duality and board size) and bank performance, using a sample of nine listed Kuwait banks over the 2006 to 2010 period.

The study uses ordinary least squares (OLS) and two‐stage‐least squares (2SLS) to test such a relationship and to address endogeneity in explanatory variables.

The results provide some evidence that board composition of banks relates to their performance. According to the OLS regression results, only board size and proportion of non‐executive directors negatively affect bank performance. Meanwhile, the 2SLS results indicate that role duality positively affects a bank's performance while board size affects a bank's performance negatively.

Although the model has explained a significant part of the variation in performance, still unexplained is a material part that represents the “noise” of the model. Data availability limited the ability to study other aspects of corporate governance mechanisms such as number of audit committee members on board. The sample size is small; thus, in future research, the sample size could be increased by including a longer period of time or different countries such as members of the Gulf Cooperation Council (GCC) (Kuwait, Bahrain, Qatar, Oman, United Arab Emirates, and Saudi Arabia).

Given the importance of effective boards in monitoring bank values, more actions and rules need to take place in Kuwait to improve the efficacy of boards in protecting shareholders and their interests in Kuwaiti banks. Regulators may mandate a corporate governance code or adopt the OECD corporate governance principles as a starting point in Kuwait. Kuwaiti companies may use the findings to make appropriate choices about board appointments and best governance to improve performance. Investors also may use the findings to understand Kuwaiti companies. Such findings may assist them to diversify their investment portfolios.

This study asserts to provide insights on the relationship between bank performance and board composition in Kuwait. The study extends prior research and investigates the roles of board of directors in banks in the context of an emerging market characterized by weak shareholder protection and highly concentrated ownership.

This paper aims to investigate the relationship between ownership structure (ownership concentration and ownership composition) and firm performance in Kuwaiti non-financial firms. To this end, it examines the relationship between firm performance and ownership concentration to determine whether the impact of this relationship is conditional on the nature of the large shareholders.

First, the relationship between ownership concentration and firm performance was tested using ordinary least squares regressions on 618 observations (103 listed firms) from 2005 to 2010; next, the ownership compositions were classified as institutional, government and individuals (families) and their impact on firm performance examined.

The overall concentration ownership by large shareholders showed no impact on firm performance. However, when the type of shareholders was introduced, only the government and individuals (families) ownership categories influenced firm performance. Therefore, certain types of shareholders are better at monitoring, and not all concentration by large shareholders is beneficial to Kuwaiti firms.

This study examined only one important aspect of the corporate governance mechanisms, namely, ownership concentration. Thus, further study may include other mechanisms such as board variables, role of debt and shareholders rights in examining the firm performance. This study is limited to the Kuwaiti environment, and thus, next step can be very useful in case of comparing ownership concentration in the Gulf Cooperation Council (Kuwait, Bahrain, Qatar, Oman, United Arab Emirates and Saudi Arabia) or across different Arab countries.

The results of this study have important implications for the regulators in Kuwait in their efforts to increase the efficiency of the rapidly developing capital markets and in protecting investors and keeping confidence in the economy. They may mandate a corporate governance code to protect minority shareholders. Investors may use the findings to understand Kuwaiti companies. Such findings may assist them to diversify their investment portfolios.

This paper extends literature review by investigating the role of large shareholders in the context of a developing country that is characterized by high level of ownership concentration and weak legal protection for investors as well as the absence of code that organized the corporate governance practices.