The Effect of Corporate Governance on Financial Performance of Indigenous Universal Banks in Ghana
Keywords:corporate governance, financial performance, indigenous universal banks, Ghana
This study assessed the influence of corporate governance variables of Board Composition, Board Size and CEO Duality on financial performance metrics of Return on Equity (ROE), Return on Assets (ROA) and liquidity. The research was an explanatory, quantitative, multiple- case study which adopted the deductive philosophy of study. The study gathered and examined secondary data on a sample of eight (8) indigenous universal banks from a population of twenty-three (23) universal banks in Ghana spanning over a period of 5 years from 2014-2018. The research deployed correlation and regression techniques in analyzing the relationship between corporate governance and financial performance of the sampled banks. The study found that Board Size exerts insignificant and positive impact on ROA whereas Board Composition and CEO Duality influence insignificant and negative effects on ROA; that Board Size influences significant and positive effect on ROE whereas Board Composition and CEO Duality exert insignificant and negative effects on ROE; and that Board Size and CEO Duality influence insignificant and positive effects on liquidity whereas Board Composition exerts insignificant and negative effect on liquidity. The study recommended that board and firm sizes should be appropriately enhanced to impact positively on performance; that board members should be constituted of outside, non-executive directors with expertise in banking; that the professional capacities of the CEO and board chairman should be strengthened and enhanced regardless of whether or not the roles are held by one person or separately by two individuals.