Corporate governance in Spanish savings banks and its relationship with financial and social performance

Abstract

Purpose

The purpose of this paper is to present empirical evidence about relationships between the corporate governance (CG) mechanisms of the Spanish savings banks, their financial and social performance and their profitability prior to their collapse.

Design/methodology/approach

The authors use a structural equation model (SEM), taking the return on assets as the dependent variable, and CG, corporate social responsibility and efficiency as explanatory constructs. SEM methodology provides interesting features that allows a better definition of some organisational characteristics.

Findings

Results indicate that CG characteristics, including the politicisation of governance bodies, did not affect the financial performance. The size of the board of directors had a significant influence on social responsibility. In addition, results suggest that the whole board focused on social issues, whereas non-executive members were less concerned about economic issues. Greater money allocation to social welfare programmes resulted in higher profitability, which can be explained by competitive advantages, reputation and customer satisfaction.

Social implications

Nowadays, some political parties demand either for the creation of a public banking sector or banks with social goals. This paper provides interesting insights into the debate.

Originality/value

The influence of personal attributes of board members on performance needs to be analysed in greater depth in the non-profit sector. The SEM methodology allows us to include some board attributes and performance dimensions in a better way than with other methodologies.

Citation

Bachiller, P. and Garcia-Lacalle, J. (2018), "Corporate governance in Spanish savings banks and its relationship with financial and social performance", Management Decision, Vol. 56 No. 4, pp. 828-848. https://doi.org/10.1108/MD-01-2017-0079