Corporate Governance and Bank Performance: A Study of Selected Banks in GCC Region

Abstract

This paper examines the effect of corporate governance denoted by board size, duality, agency cost etc. on the performance of selected 24 GCC banks based on the criteria of total assets for the financial year 2012-13. Tobin's Q and Return on Total Assets (ROTA) are adopted as a measurement of accounting and financial performance respectively.The results indicate that smaller boards are more capable for monitoring the management closely in GCC banking sector. Dual role of Chief Executive Officer (CEO) are likely to improve the GCC bank performance. The presence of block holders in ownership structure of GCC banks tends to have a positive effect on the performance of banking sector. Overall, the study concludes that the corporate governance poses a significant influence on the financial and accounting performance of GCC banking sector.

The dynamic association between CEO-duality and bank performance: the moderating role of board size

“…This finding is in line with the earlier finding of Ramdani and Witteloostuijn (2010). However, our result contradicts those of Naushad and Malik (2015) and Duru et al (2016). , lag 2 of NIM, LTA, Ln(TA) and ETA, lag 1 and lag 2 of PLLTA, lag 2, lag 3, and lag 4 of bank financial performance are used as GMM-type instruments in the transformed equations, while first difference of predetermined variable and first lagged differences of endogenous variables are instrumented in the original equations based on GMM procedure The GMM instrument matrix is collapsed to avoid instrument proliferation, As suggested by Roodman (2009).…”

“…Using data of selected 24 banks from Gulf Cooperation Council (GCC) countries in 2012, Naushad and Malik (2015) test the relationships between corporate governance variables and performance of bank. Their results indicate that for both Tobin's Q and ROA, there is a positive moderating impact of CEO-Chairman duality on board size-performance relationships.…”

Characteristics of Shar¯ı‘ah Supervisory Board, Corporate Governance Mechanisms and Efficiency of Islamic Banks: Evidence from Listed Banks in Asia

“…H2b: There exists a positive relationship between the members having a fiqh degree and efficiency of the bank. Naushad and Malik (2015) and Pathan and Fuff (2013) reveal that banks with small corporate boards have superior financial performance. Ladipo and Nestor (2012) indicate that the best performing banks have smaller and more 'mature' boards.…”

Effects of the Global Financial Crisis on the Agency Cost of Islamic Banks and Conventional Banks

“…For the banking industry, researchers often use the equity capital ratio as a proxy of AC (see, for example, Berger &Patti, 2006 andIsmail &Pratomo, 2007). Others used the majority shareholding representation as a measure of AC (see, for example, Naushad & Malik, 2015).…”

“…Easterbrook (2017) proposed, in an abstract paper, an agency-cost explanation of dividend policy. Naushad & Malik (2015) considered AC, as a corporate governance variable, to explain variability in firm performance. Their results indicate a negative effect on firm performance measured by Tobin's q, which also appeared consistent with the agency theory argument that efficient management (low AC) results in better performance.…”