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The effects of corporate governance on performance and financial distress: The experience of UAE national banks

Listed author(s):
  • Hussein A. Hassan Al-Tamimi
Registered author(s):

    Purpose - The purpose of this paper is to investigate the UAE national banks' practices of corporate governance (CG) and the perception of the UAE national banks of the effects of CG on performance and financial distress. Design/methodology/approach - A modified questionnaire has been developed, divided into two parts. The first part covers disclosure and transparency, executive compensation, relationship with shareholders, governance structure, policies and compliance, relationship with stakeholders, and board of directors. The second part deals with performance and financial distress. Findings - The results indicate that UAE banks are aware of the importance of disclosure transparency, executive compensation, the relationship with shareholders and stakeholders, and the role of the board of directors. The results also indicate that the corporate governance practices of UAE national banks are acceptable. In addition, the results reveal that there is a significant positive relationship between CG practices of UAE national banks and disclosure and transparency, shareholders' interests, stakeholders' interests, and the role of the board of directors. Furthermore, the results indicate that there is an insignificant positive relationship between CG practices of UAE national banks and performance level, and that there is a significant positive relationship between financial distress and CG practices of UAE national banks. Finally, the study found that there is no significant difference in the level of CG practices between the UAE's national conventional banks and its Islamic banks. Originality/value - The current study is considered the first of its kind conducted on the UAE. To the best of the author's knowledge, no such studies have been conducted regarding the effect of CG on performance and financial distress of UAE national conventional and Islamic banks.

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    Article provided by Emerald Group Publishing in its journal Journal of Financial Regulation and Compliance.

    Volume (Year): 20 (2012)
    Issue (Month): 2 (May)
    Pages: 169-181

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    Handle: RePEc:eme:jfrcpp:v:20:y:2012:i:2:p:169-181
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    1. Mohd Hassan Che Haat, 2008. "Corporate governance, transparency and performance of Malaysian companies," Managerial Auditing Journal, Emerald Group Publishing, vol. 23(8), pages 744-778, September.
    2. Panagiotis Staikouras & Christos Staikouras & Maria-Eleni Agoraki, 2007. "The effect of board size and composition on European bank performance," European Journal of Law and Economics, Springer, vol. 23(1), pages 1-27, February.
    3. Andy Mullineux, 2006. "The corporate governance of banks," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 14(4), pages 375-382, November.
    4. Racha Ghayad, 2008. "Corporate governance and the global performance of Islamic banks," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 24(3), pages 207-216, August.
    5. Pik Kun Liew, 2007. "Corporate Governance Reforms in Malaysia: the key leading players' perspectives," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(5), pages 724-740, 09.
    6. Huang, Chi-Jui, 2010. "Board, ownership and performance of banks with a dual board system: Evidence from Taiwan," Journal of Management & Organization, Cambridge University Press, vol. 16(02), pages 219-234, May.
    7. Eralp Bektas & Turhan Kaymak, 2009. "Governance Mechanisms and Ownership in an Emerging Market: The Case of Turkish Banks," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 45(6), pages 20-32, November.
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