Does corporate governance structures promote shareholders or stakeholders value maximization? Evidence from African banks

Abstract

Purpose The purpose of this paper is to explore the relationship between corporate governance structures and stakeholder and shareholder value maximization perspectives in 267 African banks from 2006 to 2011. Design/methodology/approach The authors used the Prais–Winsten ordinary least squares and random effect regression models to explore this relationship to ensure consistency and efficiency in results. The data for this study were collected from Bankscope. Findings The results of this study show that corporate governance structures such as CEO duality, nonexecutive members and extreme large board size lead to a reduction in both shareholder and stakeholder value maximization. However, audit independence and board size also promote both shareholder and stakeholder value maximization. Although gender diversity promotes profit maximization, it was not significant in any of the models estimated. The results further suggest that the same corporate governance structures promote and detract shareholder and stakeholder value maximization in Africa although the effect of corporate governance structures was weightier on shareholder value maximization confirming the agency theory. Practical implications From these findings, bank management must pursue the institution of good corporate governance structures and avoid weak corporate governance structures to promote shareholder and stakeholder value maximization. Also equity holders may have to pay particular attention to corporate governance structures because they benefit the most from the institution of good corporate governance structures. Originality/value This study explores and compares how corporate governance structures promote shareholder and stakeholder value maximization separately in African banks. To the best of the authors’ knowledge, this is the first of such studies.

Nudging toward diversity in the boardroom: A systematic literature review of board diversity of financial institutions

“…This theory is typically linked to the conflict of interest result from the ownership separation (Fama & Jensen, 1983; Jensen & Meckling, 1976). The board diversity literature used it to explore topics such as board diversity influence on the agency conflict and performance of financial firms (Bektas & Kaymak, 2009; Boadi & Osarfo, 2019; Farag & Mallin, 2017; Ghosh, 2017; Kaymak & Bektas, 2008; Kusi, Gyeke‐Dako, Agbloyor, & Darku, 2018; Shettima & Dzolkarnaini, 2018; Talavera, Yin, & Zhang, 2018), CSR reporting quality of financial sector (Tapver, Laidroo, & Gurvitš‐Suits, 2020), CSR practices (Isabel María García‐Sánchez, Martínez‐Ferrero, & García‐Meca, 2018), environmental, social, and governance performance (Birindelli, Dell'Atti, Iannuzzi, & Savioli, 2018), mergers and acquisition performance (Chu, Teng, & Lee, 2016; Hagendorff et al, 2007; Hagendorff & Keasey, 2012), risk taking (Abou‐El‐Sood, 2019; De Vita & Luo, 2018; Yu et al, 2017), compensation policy (García‐Meca, 2016), audit fees (Nehme & Jizi, 2018), earnings management (Fan, Jiang, Zhang, & Zhou, 2019), determinants of banks' bailouts (Fernandes, Farinha, Martins, & Mateus, 2016), and banks' efficiency (Ramly, Chan, Mustapha, & Sapiei, 2017). It is noteworthy that the agency argument helps us to understand the supervisory role of the board members to monitor and control management activities, whereas multiple theoretical perspectives enable us to better interpret the other roles of the board of directors.…”

“…Stakeholders include the company's employees, creditors, suppliers, community, and even competitors. In board diversity of financial institutions, eight studies have employed this theory (Abou‐El‐Sood, 2019; Birindelli et al, 2018; García‐Sánchez et al, 2018; Kiliç et al, 2015; Kusi et al, 2018; Mohammad et al, 2018; Orazalin, 2019; Tapver et al, 2020). This theoretical perspective has become more prominent in recent years because scholars have now realized that the actions and contributions of each director to the board are different from one to another, depending on the age, experience, gender, ethnic, education, nationality, tenure, and so forth.…”

Exploring the nonlinear effect of size on profitability: evidence from an insurance brokerage industry in an emerging market

“…Again, following the literature on stakeholder and shareholder profitability or performance (see Kotey et al , 2019; Kusi et al , 2017, 2018), the effect of firm size on shareholder and stakeholder profitability has not been extensively examined; for example, is the effect linear or nonlinear, direct or indirect? Is the effect the same on stakeholder (measured by return on assets [ROA]) and shareholder (measured by return on equity [ROE]) profitability or are there significant differences?…”

Impact of Corporate Governance and Financial Sustainability on Shareholder Value

“…This indicates that the good corporate governance not enhance only the value of shareholders but also assists to maximize all stakeholders. The stakeholder theory appeared to support the theoretical aspect of corporate governance regarding shareholder value (Kusi et al, 2018). Although the shareholders are the owners of the companies, the stakeholder theory mentions that the managers have vast responsibilities to any person or entity that can affect or affected by the firms' actions.…”