Corporate board structures, financial performance and stability: evidence from banking markets in Africa

Abstract

Purpose This study aims to examine the effects of board structures (BS) on the financial performance and stability of banks in Africa. Design/methodology/approach Using annual data of 366 banks from 26 African countries from 2007 to 2015, the study estimates growths in financial performance using net interest margin and risk-adjusted return on assets; bank stability using z-scores; and BS using board size, board independence and board gender diversity. The system generalized method of moments and ordinary least squares panel-corrected standard error estimation strategies are used to estimate panel regressions. Findings The study concludes that board independence has a negative and significant relationship with financial stability but has diverse relationships with financial performance. Board size and board gender diversity have insignificant relationships with financial performance and stability. Research limitations/implications The study has relevant implications for practitioners, policymakers and the academic community. The findings provide evidence of the extent to which BS have been instituted to influence the financial profitability and stability of banks in Africa. Originality/value This study offers robust evidence on the role of BS in the performance and stability of banks; using a multidimensional conceptualization of the performance and stability of banks in 26 countries in Africa 📚 Further Readings 📖 Corporate governance and financing decisions of Ghanaian listed firms Abor , J. · (2007) · Corporate Governance , Vol. 7 No. 1 , pp. 83 -92 📑 DOI 📖 Tracking Africa's Progress in Figures African Development Bank (AfDB) Group (2014) · (2014) 📖 Intellectual capital and profitability in an emerging insurance market Asare , N. , Alhassan , A.L. , Asamoah , M.F. and Ntow-Gyamfi , M. · (2017) · Journal of Economic and Administrative Sciences , Vol. 33 No. 1 , pp. 2 -19 📑 DOI 📖 The Banking Business - Corporate Governance Directive 2018: for Banks and Specialsed Deposit-Taking Institutions Regulated under the Banks and Specialised Deposit-Taking Institutions Act 2016 (Act 930) Bank of Ghana (Bog) · (2018) · February 2018 📖 What to do (and not to do) with times-series cross-section data in comparative politics Beck , N. and Katz , J.N. · (1995) · American Political Science Review , Vol. 89 No. 3 , pp. 634 -647 📖 Recent Trends in Banking in Sub-saharan Africa: from Financing to Investment Bending , T. , Angus , D. , Thierry , G. , Arthur , M. , Bruno , L. , Daniela , M. , Rodolfo , M. , Mauro , M. , Oskar , N. , Habil , O. , Jared , O. , Henri-Bernard , S. , Jean-Philippe , S. and Stuart , T. · (2015) · Regional Studies and Roundtables , European Investment Bank (EIB) , Luxembourg , ISBN: 978-92-861-2423-5 📖 Dynamic panel data models: a guide to micro data methods and practice Bond , S.R. · (2002) · Portuguese Economic Journal , Vol. 1 , pp. 141 -162 📖 Global Financial Development Database - World Bank (2017) (2017) 📖 Multicollinearity: what happens if the regressors are correlated Gujarati , D. and Porter , D. · (2003) · Basic Econometrics , Vol. 363 , JOUR 📖 Multivariate Data Analysis Hair , J. , Anderson , R.E. , Tatham , R.L. and Black , W.C. · (1995) · (4th ed.) , Prentice-Hall , NJ 📖 Large sample properties of generalized method of moments estimators Hansen , L.P. · (1982) · Econometrica , Vol. 50 No. 4 , pp. 1029 -1054 📖 Corporate governance, ownership structure, cash holdings, and firm value on the Ghana Stock Exchange Isshaq , Z. , Bokpin , G.A. and Onumah , J.M. · (2009) · The Journal of Risk Finance , Vol. 10 No. 5 , pp. 488 -499 📑 DOI 📖 Intellectual capital disclosure and corporate governance structure in UK firms Li , J. , Pike , R. and Haniffa , R. · (2008) · Accounting and Business Research , Vol. 38 No. 2 , pp. 137 -159 📑 DOI 📖 How to do xtabond2: an introduction to ‘difference' and ‘system' GMM in Stata Roodman , D. · (2009) · Stata Journal , Vol. 9 No. 1 , pp. 86 -136 📖 Global Financial Development Report 2015/2016: Long-Term Finance World Bank Group (WB) · (2015/2016) A Table A1 Table A1 List of countries in Africa by regions Western Number of Banks Central Number of Banks Eastern Number of Banks Northern Number of Banks Southern Number of Banks 1 Benin 7 1 Cameroon 8 1 Burundi 1 Algeria 16 1 Angola 2 Burkina Faso 9 2 Central African Republic 2 Comoros 2 Egypt 2 Botswana 12 3 Cape Verde 3 Chad 3 Djibouti 3 Libya 3 Lesotho 4 Côte d'Ivoire 13 4 Congo 4 Eritrea 4 Mauritania 8 4 Malawi 13 5 Gambia 5 Democratic Republic of Congo 5 Ethiopia 5 Morocco 15 5 Mauritius 16 6 Ghana 25 6 Equatorial Guinea 6 Kenya 6 Tunisia 19 6 Mozambique 9 7 Guinea 7 Gabon 7 Rwanda 7 7 Namibia 7 8 Guinea-Bissau 8 Madagascar 8 Seychelles 8 São Tomé and Principe 9 Liberia 9 Somalia 9 South Africa 23 10 Mali 9 10 Sudan 13 10 Swaziland 5 11 Niger 11 South Sudan 11 Zambia 21 12 Nigeria 26 12 Tanzania 31 12 Zimbabwe 14 13 Senegal 11 13 Uganda 15 14 Sierra Leone 13 15 Togo Total 113 8 B Table A2 Table A2 Variance inflation factor of variables Variable VIF 1/VIF BODSIZE 1.1900 0.8388 BODIND 1.5900 0.6290 BODGEN 1.8000 0.5554 BSIZE 1.5700 0.6373 CRL5 1.7900 0.5591 GDPpcg 1.3800 0.7244 Mean VIF 1.5500 Note(s): BODSIZE is the board size; BODIND is board independence; BODGEN board gender diversity; BSIZE, Bank Size; CRL5, 5 bank loan concentration ratio; GDPpcg, Gross Domestic Product per capita growth rate