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Corporate governance reforms and bank performance: evidence from the Middle East and North Africa

Saibal Ghosh (Centre for Advanced Financial Research and Learning, Reserve Bank of India, Mumbai, India)

Corporate Governance

ISSN: 1472-0701

Article publication date: 2 October 2017

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Abstract

Purpose

The purpose of the study is to understand the importance of corporate governance reforms for the Middle East and North Africa (MENA) country banks. To address this issue, the author combines the staggered timing of corporate governance reforms for banks across MENA countries with bank-level data for the period 2000-2012 and examine the impact on bank performance.

Design/methodology/approach

The author employs fixed effects regression within a difference-in-differences specification for the analysis.

Findings

The analysis suggests that not all governance characteristics are equally effective and some of these characteristics exert a more pronounced effect on bank performance as compared to others. These results also vary across oil-exporting and -importing nations and differ during the crisis. Besides, the authors find that improved operating efficiency and access to finance are the key channels through which governance improves bank performance.

Practical implications

Corporate governance reforms in the MENA countries need to be carefully tailored, taking into account the inherent economic characteristics of the country for it to exert durable impact. The challenge for policymakers is to find the right balance that can ensure maximum benefits for the banking sector, while minimizing the challenges involved in its implementation.

Originality/value

To the best of the authors’ knowledge, this is one of the earliest studies for MENA country banks to examine the interface between corporate governance reforms and bank performance, while controlling for the possible endogeneity of such reforms on performance.

Keywords

Citation

Ghosh, S. (2017), "Corporate governance reforms and bank performance: evidence from the Middle East and North Africa", Corporate Governance, Vol. 17 No. 5, pp. 822-844. https://doi.org/10.1108/CG-11-2016-0211

Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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