The Effect of Corporate Governance Mechanisms on Bank Performance Evidence from Saudi Banking Sector

Naif AlSagr (), Samir Belkhaoui () and Abdullah Aldosari ()

Asian Economic and Financial Review, 2018, vol. 8, issue 8, 1111-1125

Abstract: This study investigates the effect of Corporate Governance Mechanisms on bank performance, using a sample of nine Saudi banks during the period 2011-2016. The study employed six corporate governance mechanisms to examine their effect on two performance measures; ROA and ROE. In addition, the study used three control variables to separate the effect of the corporate governance variables on bank performance. Using panel data regression, the results indicated that board independence and the ownership of the largest three shareholders were the only corporate governance mechanisms that have a negative and significant effect on ROA. Board independence and the ownership of the largest three shareholders had a negative and significant effect or ROE, while the ownership of the largest shareholder and the size of audit committee had a positive and significant impact on ROE.

Keywords: Corporate governance mechanisms; Bank performance; Saudi banking sector; ROA; ROE; Board independence; Ownership of the largest Shareholder; Foreign ownership; Audit committee size. (search for similar items in EconPapers)
Date: 2018
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