Effects of Board Oversight on Performance of Banking Systems: A Case of Developing Markets Banks (original) (raw)
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Corporate governance and the financial performance of commercial banks in Ghana
Journal of Research in Emerging Markets, 2020
This study aims to provide further evidence on the effect of corporate governance on the performance of Ghanaian banks. Two performance measures were used in this study, namely: Return on Asset (ROA) and Cost-Income Ratio (CIR). Data for the analysis were sourced from 21 commercial banks from 2005 to 2015. Regression estimation techniques were employed for analysis purposes. The result revealed that large board size reduces banks’ performance. Furthermore, CEO duality and foreign ownership negatively affect the performance of banks. However, while the effect of CEO duality was significant on CIR, it was not significant in the case of ROA. On the contrary, the effect of foreign ownership was only significant on ROA. Moreover, board independence has a significant positive effect on both CIR and ROA, while audit committee independence has no significant effect on CIR and ROA. The paper argues that for a good corporate governance practice, banks should institute a small board with more...
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The banking industry has in recent times been in the news for all the bad reasons. When the current (as at the year 2019) management of the Bank of Ghana started operating in the first part of 2017, there were 30 universal banks in existence. As at 4th January 2017, that number has reduced to 23. The banks in operation as at the aforementioned date are the ones which have duly met the new Minimum Capital Directive spelt out by the regulator, Bank of Ghana. The reasons provided by the Bank of Ghana for the failure of these banks in a press release dated 4th January, 2019 are macroeconomic challenges, poor corporate governance measures, false financial reporting, and insider dealings. By utilizing the desktop research methodology, this paper examines the concept of corporate governance in detail by looking at both its theoretical framing as well as its manifestation in practice in the banking industry. It then assesses the efficiency of the 2018 Corporate Governance Directive of the Bank of Ghana against the backdrop of the OECD’s corporate governance principles for the purpose of establishing whether the Bank of Ghana’s Directive will avert a future banking crisis. It concludes by making some recommendations on how to ensure that The Directives work out as intended.
The study investigates the relationship between corporate governance and the performance of banks in Ghana in terms of their financial performance. Primary and Secondary data were collected through the administration of interview questionnaires and from the Ghana Association of Bankers respectively. In analyzing the data, panel data methodology was used. The findings show that large board size, long serving CEOs, size of audit committee, audit committee independence, foreign ownership, institutional ownership, annual general meeting and dividend policy are positively related and associated with the financial performance of banks in Ghana. The banks are encouraged to adopt good corporate governance practices to improve on their financial performance and also protect the shareholders. Most importantly, the regulatory authorities must ensure compliance with good corporate governance and apply the appropriate sanctions for non-compliance to help the growth and development of the banking sector. The main contribution of the study to knowledge lies in its effort in strengthening corporate governance beyond the rights and responsibilities of different stakeholders in the management of a firm into areas involving the relationship between finance providers and a firm, compliance with legal, ethical and environmental needs of the society among others. This contribution has in no small way helped in enhancing my understanding about the interpretations which have shaped the corporate governance in relation with performance of the firm both in theory and practice.
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The study used both primary and secondary data collected using Likert scale questionnaires. The data were statistically analysed with the SPSS. The results show that there is a significant mediation role played by credit risk management in the relationship between corporate governance practices and the financial performance of banks. The study pointed out that corporate governance practices and credit risk management have impacts on the financial performance of banks. Analyzing the individual indicators under corporate governance practices and credit risk management it was found that all the identified corporate governance practices and credit risk management indicators are significant in managing financial performance banks. The study recommended that additional studies must be conducted to assess the effects of corporate governance on other aspects of performance including marketing performance, operational performance, and administrative performance among banks in Ghana. Banks are economic instruments used to boost productivity, economic growth and poverty alleviation. The efficient running of financial sectors is a prerequisite for economic transformation, growth and development. The survival and growth of banks are critical for the sound provision of financial support to the economic players. The current study sought to examine the relationship between corporate governance practices and financial performance of banks in Ghana, examine the mediating roles of credit risk management between corporate governance practices and financial performance of banks in Ghana and examine the challenges facing banks in the implementation of corporate governance by banks in Ghana. The research approach for the study is quantitative. The application of this method provided a numerical assessment of the study.
Effects of Corporate Governance Policies on local commercial banks performance in Ghana
Good corporate governance has become essential for improving firm performance. Given the nature of banking business and the antecedents of the operations of banks, corporate governance has become fundamental to every country‘s financial stability. Despite the importance of corporate governance, few studies examine the corporate governance issues in the banking sector in Ghana. Hence this research was conducted to fill the gap on the relationship between corporate governance policies, principles and mechanism on the financial performance of local commercial banks in Ghana. A quantitative research was conducted and the data collected was analyzed with regression analysis, descriptive statistics and severity index. The study found that disclosure and transparency significantly affect bank performance. Board composition was also found to significantly affect bank performance. Also leadership structure had a positive impact on bank performance. Again the study found that the banks strictly comply with the corporate governance code for the banking sector. The enablers of corporate governance identified by the study are; the development of rewards schemes for compliance, proper monitoring and supervision, formal and periodic evaluation of CEOs and management, the encouragement of whistle blowing and protection of whistle blowers and active role of internal and external auditors. The obstacles to corporate governance were ranked as follows; lack of motivation and rewards, weak regulatory framework, ineffective management and leadership, poor external monitoring systems and weak internal control in that order. It is recommended that both management and the board of the banks ensure that it monitors and evaluate the corporate governance performance of their banks on a regular basis. The board should ensure that management are strictly enforcing the corporate governance guidelines whiles management must ensure that staffs are following the corporate governance guidelines to the latter. Lastly internal and external auditing should be conducted on a regular basis
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In this study, we examine whether Board characteristics have impact on bank performance by comparing listed and non-listed banks. The study uses panel data covering the eight year period, 1997– 2004 from all the 18 Banks in Ghana. Findings of the study confirm earlier studies. While the size of the board has positive correlation with bank performance whether listed or not listed, the more independent a board is the better the performance in spite of a bank’s listing status. Of significance is the finding that when a CEO doubles as a board chairman, it impact positively on performance in the overall sample, but negatively in both sub-samples.
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This study uses a sample of 119 commercial banks in Asia (specifically China, Philippine, Indonesia, Japan, Malaysia and Thailand) to test the impact of board governance on the bank performance. The result reported based on OLS and within estimators. In addition, two step system estimator is employed in this study to solve endogeneity problem in corporate governance literature. The finding reported that bank with large board and more independent directors sit on board it help the bank to achieve higher performance. The result shows that bank can achieve better performance with younger directors. While CEO duality and female directors are insignificant to influence the bank performance. The result also reported that the higher loan losses provision leads to bank performance decline. This study employ various governance characteristics towards performance among banking sector in selected Asian countries. The result of this study highlight the effectiveness of the board as a functionin...
Corporate governance and financial performance of listed banks: evidence form emerging market
International Journal of Economics and Accounting, 2017
One of the important elements in this century's business world that has received attention is corporate governance. The recent economic scandals and financial crisis have made it necessary to investigate the role of corporate governance on firm performance. The survival of firms has thus been associated with the existence and application of good corporate governance practices. This study examines the effect of corporate governance on financial performance of banks listed on the Ghana Stock Exchange. The study employs secondary data collected from 60 firm-year observations, consisting of seven listed banks from 2004 to 2012. The study employs pooled cross-sectional ordinary least squares regression analysis to predict the effect of the corporate governance variables on the financial performance of the listed banks. The findings from the study suggest a negative statistical significant association between board composition and the performance indicators, except for return on equit...
Role of Corporate Governance in Banking Sector: Evidence from All over the World
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This paper is focused on the recent research in the area of performance effect of corporate governance in banking sector. We review the results of studies devoted to two key nonfinancial characteristics of a commercial bank influencing its performance. In the first part of the paper we analyze the evidence on board of directors structure impact on bank performance. We focus on the performance effect of board size, independent directors and gender diversity of the board. In the second part we discuss the issue of bank ownership structure. In this paper we pay special attention to the difference between performance drivers in developed and emerging markets as well as to the performance drivers changes in times of financial crisis.
The Effect of Corporate Governance on Financial Performance of Indigenous Universal Banks in Ghana
AFRICA DEVELOPMENT AND RESOURCES RESEARCH INSTITUTE (ADRRI) JOURNAL, 2022
This study assessed the influence of corporate governance variables of Board Composition, Board Size and CEO Duality on financial performance metrics of Return on Equity (ROE), Return on Assets (ROA) and liquidity. The research was an explanatory, quantitative, multiple-case study which adopted the deductive philosophy of study. The study gathered and examined secondary data on a sample of eight (8) indigenous universal banks from a population of twenty-three (23) universal banks in Ghana spanning over a period of 5 years from 2014-2018. The research deployed correlation and regression techniques in analyzing the relationship between corporate governance and financial performance of the sampled banks. The study found that Board Size exerts insignificant and positive impact on ROA whereas Board Composition and CEO Duality influence insignificant and negative effects on ROA; that Board Size influences significant and positive effect on ROE whereas Board Composition and CEO Duality exert insignificant and negative effects on ROE; and that Board Size and CEO Duality influence insignificant and positive effects on liquidity whereas Board Composition exerts insignificant and negative effect on liquidity. The study recommended that board and firm sizes should be appropriately enhanced to impact positively on performance; that board members should be constituted of outside, non-executive directors with expertise in banking; that the professional capacities of the CEO and board chairman should be strengthened and enhanced regardless of whether or not the roles are held by one person or separately by two individuals.