Internal control mechanisms and financial performance of Ghanaian banks: the moderating role of corporate governance

Clement Oppong, Abukari Salifu Atchulo, Achille Dargaud Fofack and Daniel Elorm Afonope

African Journal of Economic and Management Studies, 2023, vol. 15, issue 1, 88-103

Abstract: Purpose - This study aims to evaluate the moderating impact of corporate governance on the relationship between internal control mechanisms and financial performance. Design/methodology/approach - The study employs a structured questionnaire to collect data from 250 top managers of rural banks in the capital of Ghana. Cronbach alpha value and Fornell-Larcker tests were performed to assess the reliability and validity of the data used. The study adopted a partial least square structural equation model (PLS-SEM). Findings - The results show that internal control and corporate governance both have a direct positive and significant impact on financial performance. Furthermore, the interaction of internal control and corporate governance also has a positive and significant impact on financial performance, thus confirming the moderating role of corporate governance in the relationship between internal control mechanisms and financial performance. Practical implications - This implies that organizations need to strengthen their corporate governance procedures to increase the efficiency of their internal control systems, which would ultimately lead to an improvement in their financial performance. Originality/value - The present study innovates by assessing the moderating role of corporate governance in the nexus between internal control mechanisms and financial performance. This moderating effect assessment implies that corporate governance may not only affect the technical implementation of the internal control structures but will subsequently make an impact on the overall performance of the organization.

Keywords: Corporate governance; Internal control; Financial performance (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-03-2023-0101

DOI: 10.1108/AJEMS-03-2023-0101

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