Abstract
This paper examines whether ownership concentration and certain type of ownership can affect the financial performance of Lebanese banks. It uses longitudinal data from the largest 35 Lebanese banks over the period 2009–2014 and employs the panel regression model. The empirical results show that ownership concentration and certain type of shareholders play an important role in the area of corporate governance in Lebanese banks. In particular, bank financial performance is positively associated with ownership concentration, managerial ownership, and foreign and institutional ownerships; however, family ownership is not related to bank performance. Also, this paper shows that both ownership concentration and managerial ownership have a U-shaped relationship with bank performance. Several robustness tests largely confirm the findings, with important implications for policy-makers. The findings are crucial to policy-makers and bankers who are interested in tailoring good corporate governance principles for the Lebanese banking sector.
Highlights
The role of corporate governance in the proper functioning of banks and the whole economy cannot be underestimated
Because banks are generally more opaque than non-financial firms (Furfine, 2001), internal governance mechanisms such as ownership structures can play an important role in monitoring bank management
Following markets globalization and worldwide corporate failures, the interest in corporate governance practices has mounted in Lebanon; though, unlike developed countries, Lebanon did not experience waves of corporate governance failure
Summary
The role of corporate governance in the proper functioning of banks and the whole economy cannot be underestimated. The patterns of ownership concentration, the identity of owners, and the institutional setting often differ dramatically across countries, but interestingly they consistently affect bank performance. The aim of this paper is to examine the relationship between ownership structure and bank performance in Lebanon. Such an examination is valuable to scholars, bankers, and policy-makers. In addition to examining an unexplored area of research related to ownership structure and bank performance in Lebanon, another contribution provided in this study is related to data collection. This paper has succeeded in assembling data on ownership structure in Lebanese banks that represent a significant advancement relative to prior empirical studies in Lebanon. Non-monotonic relationships among some of the examined variables have been reported
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