Corporate Governance and Banks Performance: Evidence from Egypt

Abstract

This study investigates the effect of corporate governance on banks' performance in Egypt. It tests the relationship between bank performance and selected factors of corporate governance mechanisms, namely the board size, non-executive directors, CEO duality, board female, board qualifications, and the block holders. Return on assets and return on equity are used as proxy for bank performance. The control variables used in this study are bank size, capital adequacy ratio, debt ratio, the real GDP growth, crisis and revolution. The study used financial data of 25 Egyptian banks covering a period from 2006 to 2014. I used Generalised Least Square (GLS) Random-Effects models to investigate for this relation to find that board size, CEO duality, capital adequacy ratio and bank size are positively affect the bank performance. Revolution has a significant negative correlation with ROA, indicating that Egyptian banks suffered significantly during the revolution period especially the local banks. Non-executive directors, women presentation, board qualifications, and the block ownership have no effect on bank performance. Despite Egyptian banks still have poor corporate governance compared to banks of developing countries, especially in transparency and disclosure; the empirical findings suggest that governance has an essential role in deciding the Egyptian banks' performance.