Corporate Governance and Accounting Performance: A Balanced Scorecard Approach

Abstract

This paper is motivated by the financial reform plan implemented in the Egyptian banking sector to enforce good corporate governance practices and improve performance. The study examines the association between governance quality and performance by estimating OLS regression models to test this relation. We measure governance as a multidimensional composite index comprised of board and ownership structure characteristics, while bank performance is measured using the Balanced Scorecard approach including financial and non-financial measures. Empirical evidence shows that governance has positive and significant impact on Egyptian bank performance. In particular, for the board structure, evidence shows that more executive directors on the board will enhance employee's productivity. We find that board size is an insignificant determinant for bank performance; however, small board size is a significant determinant for better customer-related performance and improved employee productivity. CEO/Chairman duality is unrelated to bank performance, financial and non-financial performance. As for ownership structure, direct foreign investment in Egyptian banks should be encouraged, as there is evidence that foreign ownership has favorable impact on bank performance especially on employee productivity. Ownership concentration adversely affects bank performance index, and has unfavorable effect on employee productivity. Finally, institutional ownership is a marginal determinant of employee productivity.

Corporate Governance and Banks Performance: Evidence from Egypt

“…In the same line (Odudu et al, 2016) find independent non-executive director is not related to banks performance in Nigeria. Elbannan and Elbannan (2014) find the same result in Egyptian banks. Therefore, we have the following hypothesis to test:…”

“…Similarly, another study by Ashenafi et al (2013) finds that board size has a significant inverse relation with bank performance measures (ROA and ROE). This is further confirmed by Nyamongo and Temesgen (2013) in Kenya, and Hassan and Farouk (2014) in Nigeria While Josephine and Joseph (2015) find that board size has no effect on Malaysian banks, suggesting that large board directors create problems in allocating resources and decision making which is confirmed by Elbannan and Elbannan (2014) in Egypt. Therefore, we have the following hypothesis to test:…”

“…However, some studies such as Elbannan and Elbannan (2014); Akshita (2016); Nyamongo and Temesgen (2013) look at this relation to find that CEO duality is insignificant related to bank performance measured by ROA and ROE. Therefore, we have the following hypothesis to test:…”

Does Ownership Structure Matter for Bank Performance in the MENA Region? An Empirical Evidence

“…Consistent with the previous studies (Al-Najjar and Kalaf, 2012; Elbannan and Elbannan, 2014;Tominac, 2014), return on equity (ROE), return on assets (ROA) and net interest margin (NIM) are used as indicators for the financial performance of the bank.…”

The Financial Crisis, Basel Accords and Bank Regulations: An Overview

“…Similarly, Elbannan and Elbannan (2014a) argue that governance has positive impact on bank performance, in particular, more executive directors on board enhances employee"s productivity. Moreover, Adams (2009) compares a sample of non-financial and financial firms for the period 1996-2007, and finds that on average the governance of financial firms is not worse than the governance in non-financial firms.…”