Performance Of Banks Research Articles

The impact of the COVID-19 pandemic on the financial performance and stability of Islamic banks

Purpose The purpose of this paper is to investigate the impact of the COVID-19 pandemic on the financial performance and stability of Islamic banks (IBs) in the Middle East, North Africa and Southeast Asia (MENASA) region. Design/methodology/approach The sample consists of 50 IBs across 13 MENASA countries. The data covers 11 quarters, starting in Q1 2019 and ending in Q3 2021, and are collected from banks’ quarterly reports. The authors proxy financial performance by three measures, namely, return on assets (ROA), return on equity (ROE) and cost-to-income (Cost/Income). For financial stability, the authors use two indicators: insolvency risk (log Z-score) and asset risk (ROA/SDROA). The methodology is based on the generalized least squares method estimation. Findings The results showed a significant and negative impact of COVID-19 on two performance measures of IBs (ROA and ROE) suggesting that IBs were significantly affected during the earlier pandemic. As well, the authors found strong evidence of the impact of COVID-19 on the insolvency risk and asset risk of the studied banks. Practical implications The study of COVID-19’s impact on the performance and stability of IBs in MENASA countries permits the banks’ regulators and policymakers to ameliorate the banks’ financial performance and reinforce their supervisory actions. Also, it gives them assistance to guarantee the financial stability of these banks in times of crisis. Originality/value This study provides significant financial information and policy implications for stakeholders involved in the banking sector in MENASA countries. Consequently, IBs must guarantee their profits and stability to ensure their competitiveness versus conventional banks during the period of crisis.

Impact of Covid-19 Pandemic on the Financial Performance of Islamic Bank in the Philippines

This paper investigated the impact of the Covid-19 Pandemic on the performance of Islamic banks in the Philippines. It used the quarterly data before and during the pandemic. To empirically measure its impact on the Islamic bank in the country, this study used significant different tests to ascertain differences in the financial performance of the bank starting from the 1st quarter to the 4th quarter of 2019 used as a proxy for pre-pandemic variable and the 1st to 4th quarter of 2020 which was during the heights of the pandemic as data that represents the duration of the crisis. The result shows that the overall bank size during the pandemic was reduced by 2.08% while changes in return on deposits and return on equity before and during the pandemic were not statistically significant. However, there was enough evidence to show that Islamic deposits, return on assets, and net income, were significantly positively affected by the Covid-19 Pandemic. Test for significant difference further ascertained that the decrease in capital adequacy ratio during the pandemic was found statistically significant. It suggested that Islamic banking in the Philippines fared differently compared to its conventional counterparts in the country.

Human capital and Islamic banking: a systematic literature review

Purpose There are many areas of research that are untapped in Islamic banking, and human capital is one of them. This paper aims to systematical review the relevant literature on human capital and Islamic banking. Design/methodology/approach The review process involved a structured search using well-established academic databases, Scopus and Web of Science, resulting in the selection of relevant articles. The paper has been divided into three major themes, besides other discussions on the literature, including methods of measuring human capital, determinants of human capital and human capital and performance of Islamic banks. Findings A few pioneering studies have explicitly examined human capital in the Islamic banking domain, while others have encompassed it under the broader umbrella of intellectual capital. The most common method of measuring human capital is accounting based, while few have adopted disclosure and survey methods as well. There are few studies that explored the determinants of human capital having focus on corporate governance, while many of the studies have explored the nexus of human capital and financial performance. Practical implications This review strongly highlights the need for more focused research on human capital within the Islamic banking sector. As Islamic banking necessitates unique human capital characteristics, it is essential to delve deeper into this aspect. Furthermore, there is a call to expand the human capital index by incorporating comprehensive aspects relevant to Islamic banking. An important area that requires further exploration is the role of Shariah governance in shaping human capital development within Islamic finance, understanding the reasons behind the observed negative correlation. Originality/value Despite its significance, the relationship between human capital and Islamic banking has received limited attention. This review paper not only addresses this gap but also lays the groundwork for future studies in this important and emerging field.

Improving Frontliner Performance through Digital Financial Literacy Strategy

This study aims to develop a plan for increasing staff performance at a private bank in Bandung by promoting financial digital literacy. 242 frontliners were chosen as the sample via proportionate random selection for this quantitative descriptive study. Data were evaluated using the AMOS 24 Structural Equation Model (SEM). The findings demonstrated that self efficacy, engagement, and ability all have a positive and significant impact on frontline workers' performance, with digital financial literacy serving as an effective intermediary. Based on the study's findings, a private bank performance improvement model that combines self-efficacy, employee engagement, ability, and financial digital literacy has been identified.

Bank Performance and Stability: The Mediating Role of Market Structure in Pre-and Post-Merger and Acquisition

Objective: The paper studies the mediating role of market structure on bank performance and stability before and after Merger and Acquisition (M&A). Theoretical Framework: Mergers and acquisitions (M&As) are an alternative way for business expansion and brings benefits for expansion of the market, generation and exploitation economies of scale and scope, gain of market power, proper diversification of products and services and overall improved performance. Method: The study applies advanced panel techniques and Structural Equation Modelling (SEM) on quarterly panel data (2004Q1 to 2020Q4) of 14 conventional banks from GCC and Pakistan. Results And Discussion: The results show that the bank performance and stability have improved significantly in post M&A. However, no significant change has been observed in pre-M&A. Most importantly, we have identified clear mediating role of market structure on performance and stability in post M&A. Research Implication: Merger and acquisition more potential for Islamic banks than conventional banks. Secondly, they should take into consideration the market structure since it mediates the relationship between M&As and operational performance and stability of both types of banks. Originality/Value: The study add value to the area of Islamic banking sector. Moreover, market structure is studied in case of the merger and acquisition.

Review Paper- A Study of Credit Management Policies and Loan Disbursement Operations of Co-operative Bank

This study is conducted to know Credit Policy and Loan Disbursement Operations of Co- operative Bank. Co-operative bank provides variety of credit facilities as per customer’s needs. This facilitates can be for short term or loan term. The loan growth and performance of bank is required level or not it is also assessed in this study. This study confirms that Co- operative bank should maintain a good relation with its customers to increase the profitability. To increase total number of borrowers the bank should provide all the necessary information to their customers and should provide attractive rate of interest. KEYWORDS Banking guide, Credit Term, Interest, Credit Period, Credit Policy, Collateral, Capacity, Margin, Credit Limit

Regulatory competition and cross‐fertilization in bank performance in the US banking markets

AbstractThis paper examines empirically cross‐fertilization in the productivity growth of banks between a state and its neighbouring and non‐neighbouring states (i) before (i.e. 1971–1977) the interstate multibank holding company (IMBHC) deregulations and (ii) during (i.e. 1982–1995) the IMBHC deregulations, which, through cross‐border bank M&As mainly among neighbouring states, could inject new blood, awaken the market for corporate control and enhance cross‐fertilization in bank performance among neighbouring states. Further, the 1978–1981 period offers a natural experiment to examine Baumol's Contestable Markets Hypothesis (CMH). The legislature of Maine made the first IMBHC deregulatory move in 1978. There was no reciprocity until New York and Alaska made their moves in 1982. Under CMH, Maine's move should inject a competitive spirit and alter bank performance for better across all—neighbouring or non‐neighbouring – banking markets during this period. Theoretically, Kane's regulatory equilibrium framework provides guidance to address these matters and Tiebout's people vote with their feet framework extends and supplements this guidance. Empirically, FDIC's annual banking data, aggregated at the state level, constitute the main input in computing the productivity growth indices for each of the 48 contiguous sample states between 1971 and 1995. Estimations of a novel spatially driven fixed effects model that uses these indices produce empirical results. The empirical model exploits the proximity of one sample state to its neighbouring states while also embracing a set of randomly chosen non‐neighbouring states as a control sample. Results show that cross‐fertilization in bank performance, observed among neighbouring states before the introduction of the IMBHC deregulations during 1971–1977, gets stronger in response to the dynamically evolving IMBHC deregulations during 1982–1995 and that improvements in banks' productivity growth during 1978–1981 support Baumol's CMH. Overall, our results demonstrate the importance and influence of cross‐fertilization, as a matter of proximity of subjects, on banks' performance and suggest promise for future research that embraces the spatial dimension of banking markets and data.

Corporate governance, social responsibility and sustainability commitments by banks: Impacts on credit risk and performance

AbstractWith the increasing pressures to commit to social and environmental issues, banks align with stakeholders' expectations via corporate social responsibility (CSR), and sustainable development goals (SDGs) initiatives. Understanding how these initiatives affect credit risk and performance of banks is crucial for the economy. Relying on the dynamic generalized method of moments and data on Thai listed commercial banks from 2015 to 2020, we find commitments to good governance, CSR and SDGs largely have an opposite effect on bank credit risk and performance. Consistent with stewardship or resource dependency hypothesis, together with stakeholder and good management hypothesis, banks with more female directors, higher levels of anti‐corruption and SDGs commitments are associated with a reduction in credit risk. However, consistent with queen bee hypothesis and agency and trade‐off hypothesis, banks with larger board size, more female directors and higher levels of CSR and SDGs commitments underperform. This apparent contradiction between negative impacts on bank performance and positive impacts on credit risk can be reconciled by understanding the trade‐offs involved, the long‐term focus of sustainability initiatives, leading to a decline in short‐term performance but enhancing their resilience to adverse events, ultimately reducing credit risk. Our findings enable stakeholders to make informed decisions, improve sustainable business practices, and contribute to the long‐term success of banks and the broader society.

Impact of board gender diversity on performance of public sector vis-à-vis private sector banks in India

PurposeThe Companies Act of 2013 stressed upon gender diversity in the board of management considering the significant role of women toward the success of an organization. Following it, both public and private sector banks in India implemented the act from 2015 onward. This study aims to investigate whether its implementation has improved board gender diversity uniformly across public and private sector banks. Furthermore, the authors study the impact of board gender diversity on the performance of public and private sector banks in India.Design/methodology/approachSecondary data on listed Indian commercial banks for the period 2015–2021 have been used in this study that encompasses 15 commercial and 12 public sector banks. Return on assets, return on equity and Tobin’s Q are considered as the banking performance indicators in this study, while gender diversity of the board is measured by using Blau index. Furthermore, generalized method of moments has been adopted to analyze the effect of board gender diversity on performance of the Indian banking sector.FindingsEmpirical results exhibit that board gender diversity has been gradually improving since 2015 in both public and private sector banks in India. However, board diversity in case of public sector banks is seen to be lower than that of private sector banks. Furthermore, this study found a significant impact of board diversity on the performance indicators of both public and private sector banks.Practical implicationsThis study gives a clear picture that board diversity of both public and private banks has remained quite low over the years. Apparently, women representation has been found to be less than 50% throughout the period of 2015–2021. As board diversity has significant impact on banking performance, it is important on the part of banks to take proper steps to improve the board diversity.Originality/valueThis study has added to the existing literature by highlighting on the divergence between gender diversity across public and private sector banks in India. It emphasizes on the need to improve gender diversity by a significant increase in the proportion of women in the board to create an impact on decision-making.

The Influence of Financing Diversification and Financial Performance on the Risk of Islamic Commercial Banks in Indonesia

This study aims to examine the influence of financing diversification, which includes six financing contracts of Islamic banks in Indonesia and financial performance on credit risk represented by NPF in Islamic commercial banks using regression panel data in 2018-2022. The results of this study indicate that there is an insignificant positive influence on financing diversification and financial performance partially on credit risk in Islamic banking in Indonesia. However, financing diversification and financial performance together have a significant influence on credit risk, which is currently a concern of the Islamic bank financial services authority in Indonesia. The financial performance measurement indicators in this study only focus on ROA, and this indicator may have limitations in measuring the financial performance of Islamic banking.

Board Characteristics and Bank Stock Performance: Empirical Evidence from the MENA Region

This study examined the relationship between the board characteristics and stock performance of commercial banks. Our analysis is based on a sample of 65 banks across 10 MENA countries and their quantitative data extracted between 2013 and 2022. This research employed pooled OLS, and fixed and random effect regression to confirm the association between board size, board independence, number of board meetings, and CEO duality with stock performance measured by the bank’s share price and market-to-book ratio. Further, several control variables were utilized such as the bank’s capital adequacy, profitability, and size. The empirical findings reveal that board independence positively affects the bank stock performance while the board size shows a negative relationship. This suggests that banks with fewer board members and high independence levels have their shares outperforming others. However, we found that having frequent board meetings per year and separate roles for the CEO and chairman have no impact on bank stock performance. Moreover, the findings indicate that the bank’s capital adequacy, size, and profitability have a positive effect on the stock performance. To test the robustness of our analysis, we implemented a one-limit Tobit model, which enables lower-bound censoring, and obtained similar findings thus confirming our hypotheses. From a practical perspective, our findings highlight the importance of the board size and the directors’ independence to MENA regulators and policymakers in an effort to implement an effective corporate governance system. Specifically, MENA banks are advised to decrease the number of board members, and this should reduce the number of annual board meetings which, in turn, should maximize performance.

Integrated Strategic Analytical Framework for Analysing and Improving A Bank’s Market Performance during Periods of Disruptive Competition

As the Caribbean financial market becomes increasingly competitive as a result of the increasingly more innovative fintech companies and other revolutionary traditional banks’ activities, a critical analysis of the internal and external variables and changes that can undermine a bank’s effective market performance is essential for discerning the improvement strategies that must be adopted. However, the challenge has often arisen from lack of the accurate approach for accomplishing such internal and external analysis. To fill such a gap, this study uses integrative review as one of the techniques of qualitative-content analysis to evaluate different banking performance improvement strategies and strategic management theories. Through such analysis, the study aimed to discern the integrated strategic analytical framework that can be extracted and suggested to the banking executives for analysing and improving a bank’s market performance during periods of disruptive competition. To improve a bank’s effective market performance during periods of enormous disruptions, social construction and re-construction of the merging findings imply that the accurate analysis and response to the unfolding changes in the external trends will require the banking executives to use the three frameworks’ strategic analysis to inform the competitive course of directions that the bank can undertake. The Three-Frameworks’ Strategic Analysis will require the banking executives to evaluate the stage of its industry growth stages in conjunction with the use of Porter’s “Five Forces of Industry Analysis” and Porter’s “Four Corners of Competitors’ Analysis”. Following the accurate understanding of the industry and market dynamics, findings suggest the bank executives can then craft and apply the strategies for leveraging their competitiveness whilst also countering disrupters. Such strategies would require increasing the investment in R&D to introduce novel digital banking technologies as well as the introduction of novel digital financial products/services that respond or even exceed the unfolding customer expectations. Other critical strategies would require the assimilation or nurturing and integrating the most disruptive fintech companies as part of the essential business partners. Once these strategies are being executed, it is essential the banking executives must also analyse the impacts of such strategies on the improvement of a bank’s liquidity and profitability. Basing on such insights, the study enriches the existing theories by offering the Integrated Strategic Analytical Framework that the contemporary banking executives can adopt for analysing and improving a bank’s market performance during periods of disruptive competition. However, future research can still explore how improving employees’ creativity bolsters a bank’s innovativeness to catalyse its effective market performance during periods of disruptive competition.

Monetary Policy, Digitalisation and Banking Industry Performance in Nigeria

In the evolving financial landscape of Nigeria, the interplay between monetary policy and digitalization significantly influences the performance metrics of banks. This study explores the multifaceted impact of these two critical factors on the Nigerian banking sector. Monetary policy, orchestrated by the Central Bank of Nigeria, regulates the economy's money supply, affecting banks' lending behaviors and liquidity. Digitalization, on the other hand, offers a transformative potential for banks to enhance operational efficiency, customer experience, and service delivery through technological advancements. The study examines how money supply, lending rate and digitalization (proxied by mobile cell subscription) affect banks’ financial performance, focusing on bank credit and liquid assets, while controlling for inflation and exchange rate variables. It also examines the interaction between digitalization and monetary policy variables on bank performance. Employing an interactive multiple regression model, the study analyzes time series data from 1996 to 2022 sourced from the World Bank. Findings indicate that while stringent monetary policies can constrain bank performance by tightening credit and reducing liquidity, digitalization provides an opportunity for banks to counteract these effects through enhanced efficiency. However, the successful integration of digital technologies is contingent upon adequate investment, regulatory support, and strategic alignment with the banks’ core objectives. The study concludes that Nigerian banks must adeptly manage monetary policy fluctuations and leverage digitalization to sustain and enhance performance. These insights could guide policy formulation and strategic decision-making within the banking industry.

A Study on The Cost And Profit Efficiency of Islamic and Conventional Bank Islamic Windows in Oman: A Proposed Framework

Objective: This study aims to analyze the efficiency of Islamic and conventional banks and their respective Islamic windows in Oman in terms of costs and profits. Theoretical Framework: The research employs a framework that examines cost and profit efficiency within the banking sector, contrasting the performance of full-fledged Islamic banks and Islamic windows of conventional banks. This framework also investigates the impact of bank-specific variables on efficiency levels. Method: Using empirical data from the Omani banking sector, the study quantifies efficiency by analyzing bank-specific variables such as capitalization, profitability, operational costs, and loan activity. The comparison includes both Islamic banks and the Islamic windows of conventional banks as of the end of the third quarter of 2022. Results and Discussion: The findings reveal that, overall, banks in Oman are more efficient at generating profits than controlling costs. Conventional banks, on average, demonstrate higher efficiency in both cost and profit metrics compared to Islamic banks. There exists a positive correlation between both types of efficiencies and factors like bank capitalization and profitability, while a negative correlation is evident with operational costs. Furthermore, increased loan activity is associated with higher profit efficiency but adversely affects cost efficiency. Research Implications: These results underscore significant efficiency disparities between Islamic and conventional banking sectors. They highlight the need for Islamic banks to enhance their cost management strategies without compromising profit generation, leveraging the benefits derived from their association with parent conventional banks. Originality/Value: The study contributes to the literature by providing a comparative analysis of cost and profit efficiencies in Islamic and conventional banks, with a particular focus on the unique market dynamics of Oman. This research is valuable for stakeholders in the Islamic banking industry, offering insights into leveraging existing infrastructures and enhancing operational efficiencies.

Efek Kompetitif Merger Bank Syariah Indonesia Terhadap Penyaluran Pembiayaan UMKM Dan Non-UMKM

Bank Syariah Indonesia (BSI) is merged of three state-owned subsidiary Islamic banks, namely Bank Syariah Mandiri (BSM), Bank Negara Indonesia (BNI) Syariah, and Bank Rakyat Indonesia Syariah (BRIS). The merger of the three banks is expected to provide benefits, especially for the majority of Indonesian Muslims. In addition, it can also increase the value of the company by increasing profits both through raising funds and distributing financing. This study was conducted to examine the competitive effect of Bank Syariah Indonesia merger on the distribution of UMKM financing, non-UMKM financing, total financing. The bank's performance to be tested consists of market share, net trade cycle (NTC), investment, interest expense, and return on asset (ROA) in pre and post merger at Bank Syariah Indonesia. This study used 53 data, 5 bank data after the merger and 48 bank data before the merger to test the hypothesis whether there is an influence of market share, NTC, investment, ROA on UMKM financing, non-UMKM financing and total financing. The results showed that investment variables affect UMKM financing, non-UMKM financing and total financing while market share, NTC, interest expense, and ROA variables do not affect UMKM financing, non-UMKM financing and total financing.

Data envelopment analysis for identification of bank branches appropriate locations in terms of their efficient operation

One of the main banking activities is the branch network. It provides the effective banking, the profitability. Choosing the right location of branches is very important for the bank effective operation. Random or intuitively locations can have a negative impact on key performance indicators in the future. The correct and thoughtful choice of the bank branch location ultimately determines its maximum efficiency. The paper concerns with the determining of the bank branch location in terms of thorough mathematical calculation and many factors influencing bank activity. We developed a special calculation method using the DEA (Data Envelope Analysis) methodology, considering financial, branch location, location features, etc. The paper dwells on the issue of one large branch effectiveness comparing to several smaller branches covering a wider consumer area on the example of the branch on A. Sharifzade street, Baku, Azerbaijan. Indeed, it is important to consider the location in terms of its geolocation and landscape. However, one of the main issues is expediency of establishing one large or several small branches in densely populated areas. Moreover, it is necessary to take into account the infrastructure to improve the bank performance. To consider this issue, we use both hypothetical and statistical data of Capital Bank. It is one of the largest banks in Azerbaijan. Also it has a large network of branches. The article examines expediency of establishing one large or several small branches in the area close to the existing branch of Capital Bank on A. Sharifzade street. The efficiency of the current operating branch was compared with the total efficiency of virtual branches in several combinations. We analysed the indicators of the Inshaatchylar branch and virtual branches in different combinations in different locations in accordance with DEA CRS (Constant Return to Scale) method. Additionally, we determined the effectiveness of both the Inshaatchylar branch and virtual branches in various combinations. Thus, the highest score is the most effective one.

Credit Risk and the Financial Performance of Commercial Banks in Somalia.

The operation of commercial banks in Somalia unfolds amidst formidable economic challenges stemming from political instability, ongoing conflicts, and a frail institutional framework. Nevertheless, Somalia’s financial sector exhibits resilience, with several commercial banks endeavoring to address the financial needs of businesses and individuals nationwide. These banks play a pivotal role in mobilizing savings, facilitating transactions, and providing credit, thereby supporting economic activities in Somalia’s predominantly cash-based economy. This study explored the impact of credit risk on the financial performance of Somali commercial banks, employing Modern Portfolio Theory (MPT) as the theoretical framework. Adopting a descriptive survey research design, secondary data from licensed commercial banks and the Central Bank of Somalia were analyzed over ten years (January 2014 to December 2023) using panel regression analysis. Findings reveal a moderate negative correlation between credit risk, measured by Bad Debt Expense Ratio (BDER), and financial performance, indicated by Return on Equity (ROE). Statistical tests confirm the significance of this relationship, emphasizing the importance of robust credit risk management practices for sustaining favorable financial outcomes. Recommendations include uniform improvement in risk management practices across the sector and proactive measures to mitigate emerging credit risk factors. Enhancing risk management frameworks is vital for ensuring continued financial stability and performance in the Somali banking industry.

Information technology investment and rural bank performance in Ghana: the moderating role of ICT diffusion and financial development

PurposeThis study sought to examine the interaction between rural bank performance, information and communication technology (ICT) investment, ICT diffusion and financial development.Design/methodology/approachData were sourced from the Association of Rural Banks (ARB) Apex and World Development Indicators (WDI) for the period 2014–2020. A total of 122 rural banks were used for this study. The study adopted the two-step system generalized method of moments (SGMM) estimation technique in assessing the interactions among variables.FindingsThis study found compelling evidence to support the positive effect of ICT investment on banks’ performance (return on asset and net interest margin). Further, ICT diffusion and financial development positively influence banks’ performance. The results show a positive moderating effect exerted by ICT diffusion and financial development on the impact of bank risk (bank stability) and ICT investment on all three performance measures.Originality/valueThe study focuses on the rural banking sector in the Ghanaian economy, compared to related studies that examine the subject matter for commercial banks. The moderating effects of ICT diffusion and financial development are assessed to guide policy on rural banking development in Ghana.

Islamic Banking Performance and Internal Sharia Capital Collaboration

Objective: This study examines the impact of Internal Sharia Capitals, including Organization, Operational, Infrastructure and Spiritual to Collaboration Strategy. This objective is essential to explore whether the Sharia Capital from three companies has affected the collaboration strategy after merging. Another objective of this study is to analyze the collaboration strategy as a mediator in the relationship between Innovation and Business Performance. Research Method: This research used a quantitative method with structural equation modelling analysis. Data was collected from 300 Sharia bank executives throughout Indonesia. Data was processed using SmartPLS version 4.1.0 to analyze the hypotheses for this study. Research Result & Discussion: This research finds that Operational Sharia Capital impacted Collaboration Strategy significantly. Innovation and Collaboration Strategy significantly affected business performance. Strategic Collaboration also mediated the relationship between Innovation Strategy and Business Performance. This study provides crucial information on the importance of Operational Sharia capital in a newly merged Islamic financial industry. It is similar to other financial industries in that the organization needs strategic innovation to improve business performance. Additionally, our study found that having behavioral operation management, called Behavioral Operation, to follow strict rules like Sharia Law will affect Collaboration and increase the opportunity to have better business performance. Originality and Value: Sharia capital is internal capital in Islamic Financial Industry. Based on result of study and exploring previous studies about this capital, Authors can conclude that this industry need strong operational capital, Innovation and Collaboration Strategy to have impact in business performance. The other value of this study is an interesting result of new merging sharia bank need to focus on operational and ensure it comply with Sharia rules.

The influence of corporate governance on the performance of the United Arab Emirates and other banks in the Middle East and North Africa region: A comparative analysis

This study explores the impact of corporate governance (CG) on the performance of banks in the Middle East and North Africa (MENA) region, with a focus on the United Arab Emirates (UAE). The MENA region, characterized by diverse economic landscapes, is analysed through a comparative study encompassing 141 financial institutions across 12 countries from 2016 to 2020. Key performance indicators, such as Tobin's Q ratio (TBQ), Return on Equity (ROE), and Return on Total Assets (ROTA), are assessed in relation to CG mechanisms. The research employs principles components analysis (PCA) to delve into CG practices, covering board size, independence, diversification, meetings, remuneration, and ownership concentration. External factors such as GDP growth rate, bank size, and market capitalization are also considered. Findings indicate a stable relationship between CG and financial performance, emphasizing effective governance's significance. The UAE has emerged as a CG leader since 2007, boasting a legislative framework that strengthens practices. Disparities in CG standards across the MENA region are noted, with some countries relying on regulatory standards and others implementing comprehensive CG codes. The study highlights CG's positive impact on financial performance, particularly on ROE and ROTA, in the UAE and the broader MENA region. The UAE's robust CG mechanisms, recent regulatory changes, and investor-friendly policies make it attractive for investors. Economic factors, such as GDP growth rate and bank size, are also considered. Acknowledging limitations, such as reliance on historical data, the study suggests future research avenues, including exploring specific CG mechanisms contributing to performance improvement and investigating cultural and institutional factors' impact on governance practices.