Corporate Governance in Banking: The Relationship Between Governance Structures and Financial Performance

Abstract

This study investigates the relationship between corporate governance structures and financial performance in the banking sector, focusing on board size, ownership concentration, CEO duality, and gender diversity. It also evaluates the effectiveness of governance practices in enhancing operational efficiency and risk mitigation. A quantitative cross-sectional research design was used, collecting data from 50 publicly listed banks across various geographical regions and sizes through stratified random sampling. Governance information was sourced from annual reports, corporate governance reports, and Bloomberg and Thomson Reuters databases, while financial performance metrics, such as Return on Equity (ROE) and Return on Assets (ROA), were obtained from fiscal year 2023 balance sheets and income statements. Descriptive statistics, Pearson correlation, and regression analysis were conducted using SPSS software version 25. The results show that board size positively affects both ROE (r of 0.45, p < 0.01) and ROA (r of 0.42, p < 0.01), while CEO duality negatively influences both metrics (ROE: r of -0.37, ROA: r of -0.25). Gender diversity has a positive impact on ROE (r of 0.31, p < 0.05) and a weaker association with ROA (r of 0.18, p < 0.05). Regression analysis reveals that board size and gender diversity explain 38% of ROE variability, while board size and CEO duality account for 31% of ROA variability. The study underscores the importance of robust governance structures in improving financial performance and managing risks. Recommendations include enhancing decision-making processes, risk management, and board diversity, while regulatory bodies should improve disclosure standards. Future research could explore the impact of digital banking innovations and cross-border governance standards.