The Impact of Regulatory Pressures on Governance on the Performance of Public Banks’ with a European Mediterranean Region Connection

Abstract

Purpose: With this paper, we aim to provide an insight on the regulatory reforms on corporate governance, brought about, by its ineffectiveness in the global financial crisis. Design/Approach/Methodology: To this effect we compared accounting ratios over a period of 10 years - 5 years prior and during financial crisis (i.e. 2006-2010) and 5-years post regulatory reforms on governance (i.e. 2014-2018) -using panel data of ratios for profitability, liquidity and efficiency. Findings: The general trend in the banks was that profitability and efficiency decreased drastically in the post regulatory period, contrary to liquidity, which increased, as higher capital buffers were imposed on banks. Practical Implications: This study is important because the burden of regulations is detrimental to the performance of public banks in the EU Mediterranean region. There are several arguments that the burden of compliance is becoming very costly and this is negatively affecting their profitability and efficiency. Originality/Value: These findings are of interest to economists and policy makers within the European Mediterranean region.