The Effect of Corporate Governance on Bank Financial Performance: Evidence from the Arabian Peninsula

Basuony, Mohamed A. K.; Ehab, K. A. Mohamed; Al-Baidhani, Ahmed Mohsen

doi:10.2139/ssrn.2657587

Cited by 10 publications

(10 citation statements)

References 134 publications

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“…Wheelock and Wilson (2000) show in particular that bank age, which reflects management experience, is negatively associated with bank distance to failure. Basuony et al (2014) find a positive relationship between a bank's age and its value, and argue that as the number of years since operation increases, banks will gain a loyal customer base and benefit from the experience curve. Thus, we extend our analysis and investigate whether the impact of diversification on bank performance is conditioned upon bank experience in doing business.…”

Section: Introductionmentioning

confidence: 93%

“…As Bouwman and Malmendier (2015) pointed out, the experience of banks through difficult times will affect their risk-taking behaviours, which in turn influence the bank's willingness to shift their business towards a more fee-based model. More experienced banks may also create for themselves a loyal customer base (Basuony et al, 2014). In the context of diversification, this may help banks to create fee-based services that are more suitable for their customers and make it easier for the customer to accept the new fees introduced to them.…”

Section: Bank Experience Income Diversification and Bank Performancementioning

confidence: 99%

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Income diversification and financial performance of commercial banks in Vietnam

Luu

Nguyen

et al. 2019

RBF

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Purpose The purpose of this paper is to investigate the impact of income diversification on the financial performance of commercial banks in Vietnam over the period 2007–2017. It then provides additional analysis to examine whether the diversification–performance nexus is conditioned upon bank experience and ownership structure. Design/methodology/approach The financial information of each bank were manually collected from bank annual reports. In the empirical model, a number of modern econometric techniques, including panel OLS with fixed effects and a two-step system GMM estimator, were utilised to achieve the research objectives. Findings The empirical results show that income diversification has a positive impact on banks’ performance. However, the effect varies across different types of banks. Specifically, the authors find that while diversification benefits state-owned and foreign banks, it exhibits a detrimental effect on the financial performance of other non-state owned domestic banks. In addition, the authors further find that the positive impact of diversification is more prominent for banks with more experience in the market. Originality/value This study is among the first to empirically investigate the relationships between income diversification and the financial performance of commercial banks in Vietnam. In this sense, the findings of this study could draw important inferences for researchers, policy makers and bank managers towards more appropriate diversification strategies, to ensure the safety and soundness of the whole banking system.

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Section: Introductionmentioning

confidence: 93%

Section: Bank Experience Income Diversification and Bank Performancementioning

confidence: 99%

Income diversification and financial performance of commercial banks in Vietnam

Luu

Nguyen

et al. 2019

RBF

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“…For nonfinancial items, corporate governance has been identified as one of the main factors that contribute to the issuance of a going concern opinion (Carson et al 2013), thereby suggesting that an improved corporate governance increases the level of transparency in the financial system and enhancing investor confidence. In addition, Basuony et al (2014) suggest that agency conflicts can be reduced by using the appropriate corporate governance tools, including the presence of an effective internal auditor.…”

Section: Going Concern Opinionmentioning

confidence: 99%

The Impacts of Investment in Internal Audit Functions on the Going Concern Opinion for Financially Distressed Firms

2020

AJAG

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We investigate the effects of internal audit investments on financially distressed firms in Malaysia. Specifically, we examine the impacts of internal audit investments on these firms' going concern opinion. We argue that higher internal audit investments expedite these firms' recoverability by improving their controls and operations. The assurance and consulting activities provided by internal auditors enable these firms to mitigate the material uncertainty of the going concern opinions issued by external auditors. To examine such relationship, we chose 137 firm-year observations of Malaysian financially distressed firms listed on Bursa Malaysia from 2016 to 2018. We ran a logistic regression analysis and found that internal audit investments are negatively and significantly associated with the going concern opinions reported by an external auditor. This result suggests that high internal audit investments reduce the likelihood for an external auditor to issue a going concern opinion. As stated in ISA 570, if recovery plans have no material uncertainty and are sufficient to mitigate the going concern problem (which is argued to be assisted by the internal audit function of the firm), then an external auditor can issue a clean audit report even for firms that are in financial distress. Evidence from this study contributes to our understanding of the importance of investments in internal audit functions and highlights that the assurance and consultation from internal auditors can ensure a careful monitoring of the strategies and operations of firms.

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“…Audit committees oversee the organization's management, internal and external auditors to protect and preserve the shareholders' equity and interests. To ensure effective corporate governance, the audit committee report should be included annually in the organization's proxy statement, stating whether the audit committee has reviewed and discussed the financial statements with the management and the internal auditors (Basuony et al, 2014). As a corporate governance monitor, the audit committee should provide the public with correct, accurate, complete, and reliable information, and it should not leave a gap for predictions or uninformed expectations (BRC, 1999).…”

Section: Introductionmentioning

confidence: 99%

“…The audit committee operates as a representative of the board of directors from whom it receives its powers to perform its corporate governance responsibilities which include overseeing and monitoring the organization's financial reporting, disclosure, internal and external audit, internal control, regulatory compliance, and risk management activities; this applies to public, private, and mix sectors, as well as some non-governmental and not-for-profit organizations. The audit committee provides the board of directors with necessary advices and recommendations which include ensuring: that the respective organization complies with relevant regulations and ethical principles and standards; that the internal auditors are independent and competent; that the financial statements have been prepared correctly and accurately; and that the compensations paid to the organization's executives were according to fairness and professionalism (Basuony et al, 2014). As part of improving the integrity of the organization's financial information, a regulatory body may require a public company to create an independent audit committee (Bhagat and Black, 2002).…”

mentioning

confidence: 99%

The Role of Audit Committee in Corporate Governance: Descriptive Study

Al-Baidhani

2014

SSRN Journal

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Corporate governance is very important in our business world today, especially after the frequent non-stop worldwide financial crises. Strong corporate governance is now considered a basic condition to accept and register an organization in most of the Stock Exchange Markets all over the world. The audit committee plays a major role in corporate governance regarding the organization's direction, control, and accountability. As a representative of the board of directors and main part of the corporate governance mechanism, the audit committee is involved in the organization's both internal and external audits, internal control, accounting and financial reporting, regulatory compliance, and risk management. This paper focuses on the audit committee's powers, functions, responsibilities, and relationships within the framework of corporate governance.

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The Effect of Corporate Governance on Bank Financial Performance: Evidence from the Arabian Peninsula

Cited by 10 publications

References 134 publications

Income diversification and financial performance of commercial banks in Vietnam

Income diversification and financial performance of commercial banks in Vietnam

The Impacts of Investment in Internal Audit Functions on the Going Concern Opinion for Financially Distressed Firms

The Role of Audit Committee in Corporate Governance: Descriptive Study

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