Bank Corporate Governance and Future Earnings Predictability

41 Pages Posted: 19 May 2015 Last revised: 29 Jul 2015

See all articles by Sabur Mollah

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Omar Al Farooque

University of New England (Australia) - UNE Business School

Mobarek Asma

Stockholm Business School

Philip Molyneux

University of Sharjah - College of Business Administration

Date Written: May 16, 2015

Abstract

This study examines the impact of corporate governance on earnings predictability in large banks from 35 countries over the period 2004-2010. We find that board structure and CEO power have a significant positive influence on earnings predictability of future cash flows although these findings vary for emerging markets and between common and civil law countries. Board structure and CEO power are more effective in predicting future cash flows in civil law countries whereas in common law countries risk governance is a more accurate predictor of earnings. Similarly, we find differences between developed and emerging countries. While in both domains there is no qualitative difference in CEO power to predict future cash flows, board structure and risk governance are less effective in emerging countries.

Keywords: Earnings Predictability, Corporate Governance, Bank, GAAP/IFRS

JEL Classification: G21, G32, G38

Suggested Citation

Mollah, Sabur and Farooque, Omar Al and Asma, Mobarek and Molyneux, Philip, Bank Corporate Governance and Future Earnings Predictability (May 16, 2015). Available at SSRN: https://ssrn.com/abstract=2607098 or http://dx.doi.org/10.2139/ssrn.2607098

Sabur Mollah (Contact Author)

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

Omar Al Farooque

University of New England (Australia) - UNE Business School ( email )

Armidale, NSW 2351
Australia

Mobarek Asma

Stockholm Business School ( email )

Roslagsvägen 1010
Stockholm, SE-106 91
Sweden

Philip Molyneux

University of Sharjah - College of Business Administration ( email )

University City Road
Sharjah, 27272
United Arab Emirates

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