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The Impact of Corporate Governance on the Financial Performance of the Banking Sector in the MENA (Middle Eastern and North African) Region: An Immunity Test of Banks for COVID-19

Author

Listed:
  • Hani El-Chaarani

    (College of Business Administration, Beirut Arab University, P.O. Box 1150-20, Riad El Solh 11072809, Lebanon)

  • Rebecca Abraham

    (Huizenga College of Business, Nova Southeastern University, 3301 College Avenue, Fort Lauderdale, FL 33314, USA)

  • Yahya Skaf

    (Rafic Hariri University Campus-Hadath, Lebanese University, P.O. Box 6573/14, Beirut 11072809, Lebanon)

Abstract

The purpose of this paper is to measure the impact of internal and external corporate governance mechanisms on the financial performance of banks in the under-researched Middle Eastern and North African (MENA) region during the COVID-19 pandemic period. Bank annual reports, the Orbis Bank Focus database, and World Bank reports were used to collect both financial and non-financial information on the banking sector, followed by fixed effects regressions and two-stage least squares. Results showed that the corporate governance measures of presence of independent members on the board of directors, high ownership concentration, lack of political pressure on board members, and strong legal protection, had positive effects on bank financial performance. Corporate governance mechanisms, such as performance-based compensation, the presence of women on boards, moderate size of the board, and anti-takeover mechanisms had no significant impact on bank performance during the crisis period. An effective internal and external corporate governance mechanism could improve the financial performance of banks in MENA countries in times of pandemics and crises.

Suggested Citation

  • Hani El-Chaarani & Rebecca Abraham & Yahya Skaf, 2022. "The Impact of Corporate Governance on the Financial Performance of the Banking Sector in the MENA (Middle Eastern and North African) Region: An Immunity Test of Banks for COVID-19," JRFM, MDPI, vol. 15(2), pages 1-21, February.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:2:p:82-:d:750959
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    2. Md. Abu Issa Gazi & Md. Nahiduzzaman & Iman Harymawan & Abdullah Al Masud & Bablu Kumar Dhar, 2022. "Impact of COVID-19 on Financial Performance and Profitability of Banking Sector in Special Reference to Private Commercial Banks: Empirical Evidence from Bangladesh," Sustainability, MDPI, vol. 14(10), pages 1-23, May.
    3. Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "Generalization of the Brusov–Filatova–Orekhova Theory for the Case of Variable Income," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 265-290, Springer.
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    5. Hossein Tarighi & Zeynab Nourbakhsh Hosseiny & Maryam Akbari & Elaheh Mohammadhosseini, 2023. "The Moderating Effect of the COVID-19 Pandemic on the Relation between Corporate Governance and Firm Performance," JRFM, MDPI, vol. 16(7), pages 1-43, June.
    6. Dian Perwitasari & Doddy Setiawan & An Nurrahmawati & Isna Putri Rahmawati, 2022. "Firm Performance during COVID-19 Pandemic: Does Ownership Identity Matter? Evidence from Indonesia," JRFM, MDPI, vol. 15(10), pages 1-18, September.
    7. Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "Influence of Method and Frequency of Profit Tax Payments on Company Financial Indicators," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 241-264, Springer.
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