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

31 Pages Posted: 1 Jul 2013 Last revised: 22 Oct 2014

See all articles by Dr. Ahmed Al-Baidhani د. احمد البيضاني

Dr. Ahmed Al-Baidhani د. احمد البيضاني

University Putra Malaysia - Putra Business School; Maastricht School of Management (MSM); The German University in Cairo

Date Written: May 22, 2013

Abstract

Whereas banks operate under different management, board of directors, ownership structures, and government regulations, there is no specific optimal corporate governance model that may be applied to all banks. This study investigates the effect of internal corporate governance mechanisms such as board structure, ownership structure, and audit function as well as other variables such as bank size and bank age on bank financial performance. The sample of the study comprises of both conventional and Islamic banks operating in the seven Arabian Peninsula countries, namely Yemen and the Gulf Cooperation Council (GCC) countries, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates. Regression analysis (OLS) is used to test the aforementioned effect. The results of this study reveal that there is a significant relationship between corporate governance and bank profitability. Board meetings and bank age have positive and significant effects on ROE. Meanwhile, board independence and bank size have negative and significant effects on ROA. In addition, while bank age and board committees have positive effects on Profit Margin, ownership concentration has a negative effect on this profitability measure. These results are consistent with previous studies. However, the literature indicate that the correlation between corporate governance and bank performance is still not clearly established and that impact of corporate governance on bank financial performance in developing countries is still relatively limited.

Keywords: corporate governance, bank performance, board structure, ownership structure, audit function, profitability, Yemen, GCC countries

Suggested Citation

Al-Baidhani د. احمد البيضاني, Dr. Ahmed, The Effects of Corporate Governance on Bank Performance: Evidence from the Arabian Peninsula (May 22, 2013). Available at SSRN: https://ssrn.com/abstract=2284814 or http://dx.doi.org/10.2139/ssrn.2284814

Dr. Ahmed Al-Baidhani د. احمد البيضاني (Contact Author)

University Putra Malaysia - Putra Business School ( email )

Universiti Putra Malaysia (Mosque)
Selangor, Selangor 43400
Malaysia

Maastricht School of Management (MSM) ( email )

Endepolsdomein 150
Maastricht, Limburg 6201 BE
Netherlands

The German University in Cairo ( email )

El Tagamoa El Khames
New Cairo City, 11835
Egypt

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