The impact of corporate governance frameworks on Middle East and North Africa banks performance

Abstract

Purpose

The debate on the impact of corporate governance frameworks on bank performance is still ongoing and the large empirical literature on the association between them is still inconclusive. This study aims to contribute to this flow of research by detecting the association between six corporate governance variables and cost efficiency and return on assets.

Design/methodology/approach

This study exploits the generalised method of moments method on a sample of 150 banks operating in 15 MENA countries between 2009 and 2020.

Findings

The empirical results show that larger boards and the existence of large share owners result in a lower cost efficiency and profitability. Conversely, it was found that a higher percentage of women board members, and the presence of an audit committee boost bank performance. Finally, the results do not show that board independence and chairperson-CEO role duality play any substantial role in determining Middle East and North Africa (MENA) bank cost efficiency and profitability.

Practical implications

The findings of this paper suggest putting cap on the size of boards, restricting ownership block holding, encouraging higher gender diversity and selecting independent, non-executive directors based on experience and expertise, not only to meet the regulatory requirements in the MENA banking sector.

Originality/value

The added value of this paper is that it proposes directives for the MENA banking regulators regarding the optimal board of director’s structure related to size and composition.

Citation

Labban, H. and Roussel, J. (2025), "The impact of corporate governance frameworks on Middle East and North Africa banks performance", International Journal of Islamic and Middle Eastern Finance and Management, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IMEFM-03-2024-0149