Effect of corporate governance practices on organizational performance a study of some selected banks in Ghana

Abstract

Corporate governance practices by corporate bodies especially banks has garnered much concern in Ghana, Africa and the world at large as organizations involved in corporate scandals were deemed to have poor corporate governance framework (Ali et al., 2020; BoG, 2018; Amenu-Tekaa, 2022) The present study sought to investigate the real association between corporate governance measures and financial performance and the effect corporate governance structures have on financial performance of banks in Ghana. The study employed causal research design and quantitative approach toward its enquiry. Through census sampling, panel data for the eleven listed universal banks listed on the Ghana stock exchange were collected for the study from 2008-2021. Financial performance was proxied with Return on Total Asset (ROTA) and Return on Equity (ROE) whilst corporate governance was proxied with BGD, BS and BC. Dynamic Panel was adopted as the estimation technique, Engle Generalized Least Square (EGLS) with random effect in E-views was deployed for statistical data analysis. Linearity test, Heteroskedasticity test, unit root and Hausman test were conducted to ensure the robustness the results. Empirical results revealed that corporate governance practices such as Board Gender Dynamics (BGD) have positive relationship with ROTA, Board Size (BS) showed inverse relationship with ROTA, Board Composition (BC) depicted positive association with ROTA whilst Board Gender Dynamics (BGD had positive yet insignificant association with ROE. Notwithstanding, board size has a negative effect on financial performance whist board gender diversity and board composition together have positive relationship with financial performance when proxied with ROE. The various control variables showed mixed results with the two measures of financial performance. Based on the findings from the research, the study recommend that companies should pay attention to the caliber of members constituting a board, their background and their understanding about a bank’s operation. Again, effort should be made to include as many as possible females on a company’s board since it has predictive power on a company’s performance.