THE INTERACTION BETWEEN CORPORATE GOVERNANCE AND FINANCIAL PERFORMANCE: AN IMPLEMENTATION FOR THE UK BANKS

Year 2020, , 64 - 69, 31.12.2020

Ibrahim Almusattar Dilek Teker

https://doi.org/10.17261/Pressacademia.2020.1350

Abstract

Purpose- The purpose of this study is to examine the relationship between the performance of commercial banks with corporate governance elements. Thus, the listed commercial banks in the London Stock Exchange (LSE) of the UK will be considered in this study. Hence, using availability data of the Financial Times Stock Exchange 100 (FTSE 100) companies including banks that operate in LSE, the period (2010-2019).
Methodology- The study employs a sample of 10 biggest banks trading on (LSE) ranked by market capitalization as of December 31st. 2019. The study will use panel data method and the results will be analysed by descriptive statistics, correlation, and regression. Seven major corporate governance variables will be analysed within the framework of corporate governance theory namely: Board Size, Board Independent, Foreign owners, bank ownership structure, Audit Committee, Female Board, Financial Leverage, and board size and their impact on the financial performance of the commercial bank in the UK which will be measured using Return on Assets Ratio (ROA), Return on Equity (ROE), and The TOBIN’s Q.
Finding- The analysis of previous studies reveals that internal corporate governance mechanism (Board of Director's) has significant impact on the performance of banks such as Tamer Shahwan (2014).
Conclusion- This study will investigate the relationship between CG (Board Characteristics, Audit committee, Owners structure, and banks size and financial leverage) and banks performance which will measured by (ROA, ROE, and TOBIN; Q).

Keywords

Corporate governance, board of directors’ characteristics, audit committee characteristics, ownership structure, bank performance

References

• Al-Amarneh, A. (2014). Corporate governance, ownership structure and bank performance in Jordan. International Journal of Economics and Finance, 6(6), 192-202.‏
• Bhagat, S., & Jefferis, R. H. (2005). The econometrics of corporate governance studies. MIT Press.
• Basuony, M., & Ehab, K. A. (2015). The effect of corporate governance on bank financial performance: evidence from the Arabian Peninsula. ‏
• Bathula, H. (2008). Board characteristics and firm performance: Evidence from New Zealand (Doctoral dissertation, Auckland University of Technology).
• Bouheni, F. B., Ammi, C., & Levy, A. (2016). Banking Governance, Performance and Risk-taking. ISTE Ltd. London-UK.‏
• Boussaada, R., & Karmani, M. (2015). Did board of directors have an impact on MENA bank performance? International Journal of Economics and Finance, 7(4), 46-56
• Choudhury, M. A., & Alam, M. N. (2013). Corporate governance in Islamic perspective. International journal of Islamic and Middle Eastern finance and management.‏
• Financial Report Council. The Cadbury Report of corporate governance (1992). [Online]. Last accessd 4 April 2020: ashttp//: www.frc.org.uk.
• Hoti, A., & Dermaku, A. (2018). Corporate Governance in the Banking Industry of Kosovo. International Journal of Finance & Banking Studies (2147-4486), 7(3), 20-34.‏
• Kowalewski, O. (2016). Corporate governance and corporate performance: financial crisis (2008). Management Research Review.‏
• Lutzy, J. M. (2003). Analysis of the proposed NYSE corporate governance and audit committee listing requirements. DePaul Bus. & Comm. LJ, 2, 99.‏
• Makki, M., & Lodhi, S. A. (2013). Impact of corporate governance on financial performance. Pakistan Journal of Social Sciences, 33(2), 265-280.‏
• Mehrotra, S. (2016). The Nature of Corporate Board Structure and Its Impact on the Performance of USA Listed Firms. IUP Journal of Corporate Governance, 15(1).‏
• McIntyre, M. L., & Murphy, S. A. (2008). Board of director performance reporting. Corporate Governance: The international journal of business in society.‏
• Mirchandani, A., & Gupta, N. (2018). Impact of ownership structure and corporate governance on the performance: A case of selected banks in UAE. International Journal of Economics and Financial Issues, 8(3), 197.‏
• Muzhar Javed, R. S., Lodhi, R. N., & Malik, Q. U. Z. (2013). The effect of board size and structure on firm financial performance: A case of banking sector in Pakistan. Middle-East Journal of Scientific Research, 15(2), 243-251.
• Mullineux, A. (2006). The corporate governance of banks. Journal of Financial Regulation and Compliance.
• Naushad, M., & Malik, S. A. (2015). Corporate governance and bank performance: a study of selected banks in GCC region. Asian Social Science, 11(9), 226.‏
• Isik, O. (2017). The dynamic association between CEO duality and bank performance: the moderating role of board size. Research Journal of Business and Management (RJBM), 4(4), 460-468.
• Organisation for Economic Co-operation and Development (2001).). [Online]. Last access 4 April 2020: at:mhttp//:www.oecd.org.
• Othman, R., Embi, R., Aris, N. A., Arif, S. M. M., Choo, H. C., & Ismail, N. (2016). Board Governance and Performance: An Exploratory Study of Malaysian Cooperative Organizations. Journal of Southeast Asian Research, 2016, 59-70.‏
• Pande, S., & Ansari, V. A. (2014). A theoretical framework for corporate governance. Indian Journal of Corporate Governance, 7(1), 56-72.‏
• Reddy, K., Locke, S., & Fauzi, F. (2013). Relevance of corporate governance practices in charitable organisations. International Journal of Managerial Finance.‏
• Salim, R., Arjomandi, A., & Seufert, J. H. (2016). Does corporate governance affect Australian banks' performance? Journal of International Financial Markets, Institutions and Money, 43, 113-125.
• Shahwan, T. M. (2015). The effects of corporate governance on financial performance and financial distress: evidence from Egypt. Corporate Governance.
• Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and practices. Oxford University Press, USA.‏ ‏
• Zelechowski, D. D., & Bilimoria, D. (2004). Characteristics of women and men corporate inside directors in the US. Corporate governance: an international review, 12(3), 337-342