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How does internal governance affect banks’ financial stability? Empirical evidence from Egypt

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posted on 2022-11-22, 21:11 authored by Mohamed Marie, Hany Kamel, Israa Elbendary

This paper investigates whether internal governance mechanisms were associated with the financial stability of Egyptian banks over the period 2010–2019. To this end, a GMM regression analysis was employed using 252 firm-year observations. The results, in general, indicate that the level of banks’ financial stability is positively associated with board size, board meetings, and board gender. In contrast, the results show that board education and the ownership of shares by directors are negatively associated with banks’ financial stability. More interestingly, our results demonstrate that higher financial stability is significantly associated with lower board independence, the presence of CEO duality, and fewer audit committee meetings. These striking results can be attributed to the argument that the presence of independent directors on the board may reduce the CEO’s willingness to share information with board members, causing a high level of uncertainty in the decision-making process, which ultimately leads to a reduction in the financial stability of their bank.

Other Information

Published in: International Journal of Disclosure and Governance
License: https://creativecommons.org/licenses/by/4.0
See article on publisher's website: http://dx.doi.org/10.1057/s41310-021-00110-8

History

Language

  • English

Publisher

Springer Science and Business Media LLC

Publication Year

  • 2021

Institution affiliated with

  • Qatar University

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