Corporate governance and the financial performance of commercial banks in Ghana

Abstract

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 than half of the members being independent directors. Furthermore, the role of the board chair should be separated from that of the managing director/CEO. The study provides insight and further evidence to stakeholders and regulators to deal with the crisis in the Ghanaian banking sector.

Does Corporate Governance, Liquidity, and Bank Size Affect the Efficiency of Sharia Banks in Indonesia?

“…This finding is supported by other research, including Isik (2017) which investigated the relationship between CEO duality and the financial performance of Turkish banks. On the other hand, these findings differ from the results of research conducted by Naseem et al (2020) and Gyamerah et al (2020) which state that CEO duality hurts performance in banking.…”

Corporate governance disclosure and corporate performance of Nigerian banks

“…There is a large and growing literature about different dimensions and contexts of corporate governance and corporate reporting and disclosure (See, for example: Palepu, 1993, 2001;Verrecchia, 1983Verrecchia, , 2001Wallace, Naser, and Mora, 1994;Wallace and Naser, 1995;Owusu-Ansah, 1998;Botosan, 1997;Dockery and Herbert, 2000a, b;Dockery, Herbert and Taylor, 2000;Herbert, 2001;Mitton, 2002;Arun and Turner, 2002a, b;Baek, Kang and Park, 2004;Refait-Alexandre, Farvaque, Garnet, and Saïdane, 2009;Bhasin, 2010;Herbert and Tsegba, 2011;Jiao, 2011;Subramanian and Reddy, 2012;Dockery, Tsegba, and Herbert, 2013;Tsegba and Herbert, 2013a, b;Tsegba, Herbert and Ene, 2014;Dembo and Rasaratham, 2014;Emmanuel and Sabastian, 2015;Gyamerah, Amo and Adomako, 2020;Soyemi, Afolabi and Obigbemi, 2021)). The attention of this section is limited to the literature on the nexus between dimensions and contexts of corporate governance disclosure and financial performance.…”

Impact of Board of Directors on Performance of Brazilian Banks

“…In some studies, it was evidenced that the size of the boards significantly and negatively impacted ROA, as in the research carried out by Aslam and Haron (2020), Gyamerah et al (2020), Boussaada and Karmani (2015), Liang et al (2013), Pathan and Faff (2013), Bonn et al (2004). This relationship is justified by the possibility that large boards are more susceptible to inefficiency in the process of coordination, communication, and decision making.…”

“…Aslam and Haron (2020);Gyamerah et al (2020);Johan and Hapsari (2020);Haris et al (2019);Aktan et al (2018);AlSagr et al (2018);Hajer and Anis (2018);Chou and Buchdadi (2017);Isik and Ince (2016);Belhaj and Mateus (2016);Bukair and Rahman (2015);Boussaada and Karmani (2015);Kilic (2015);Fidanoski et al (2014);Chaarani (2014);Abdul et al (2014);Liang et al (2013);Pathan and Faff (2013);Adams and Mehran (2012);Andres and Vallelado (2008);Adams and Mehran (2008);Bonn et al (2004).ROEMeasures the profitability of the company's shareholders 'equity, defined by the ratio between Net Income and Shareholders' Equity Aslam and Haron (2020)Haris et al (2019);Aktan et al (2018);Handa (2018);AlSagr et al (2018);Hajer and Anis (2018);Kramaric and Pervan (2016);Belhaj and Mateus (2016);Bukair and Rahman (2015);Boussaada and Karmani (2015);Kilic (2015); Chaarani (2014); Fidanoski et al (2014); Liang et al (2013); Pathan and Faff (2013(2020); Gyamerah et al (2020); Haris et al (2019); Aktan et al (2018); Handa (2018); AlSagr et al (2018); Hajer and Anis (2018); Chou and Buchdadi (2017); Kramaric and Pervan (2016); Isik and Ince (2016); Belhaj and Mateus (2016); Bukair and Rahman (2015); Boussaada and Karmani (2015); Kilic (2015); Chaarani (2014); Fidanoski et al (2014); Abdul et al (2014); Liang et al (2013); Pathan and Faff (2013); Adams and Mehran (2012); Andres and Vallelado (2008); Adams and Mehran (2008); Bonn et al (2004).…”