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The effects of corporate governance on performance and financial distress

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  • Hussein A. Hassan Al‐Tamimi

Abstract

Purpose - The purpose of this paper is to investigate the UAE national banks' practices of corporate governance (CG) and the perception of the UAE national banks of the effects of CG on performance and financial distress. Design/methodology/approach - A modified questionnaire has been developed, divided into two parts. The first part covers disclosure and transparency, executive compensation, relationship with shareholders, governance structure, policies and compliance, relationship with stakeholders, and board of directors. The second part deals with performance and financial distress. Findings - The results indicate that UAE banks are aware of the importance of disclosure transparency, executive compensation, the relationship with shareholders and stakeholders, and the role of the board of directors. The results also indicate that the corporate governance practices of UAE national banks are acceptable. In addition, the results reveal that there is a significant positive relationship between CG practices of UAE national banks and disclosure and transparency, shareholders' interests, stakeholders' interests, and the role of the board of directors. Furthermore, the results indicate that there is an insignificant positive relationship between CG practices of UAE national banks and performance level, and that there is a significant positive relationship between financial distress and CG practices of UAE national banks. Finally, the study found that there is no significant difference in the level of CG practices between the UAE's national conventional banks and its Islamic banks. Originality/value - The current study is considered the first of its kind conducted on the UAE. To the best of the author's knowledge, no such studies have been conducted regarding the effect of CG on performance and financial distress of UAE national conventional and Islamic banks.

Suggested Citation

  • Hussein A. Hassan Al‐Tamimi, 2012. "The effects of corporate governance on performance and financial distress," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 20(2), pages 169-181, May.
    • Handle: RePEc:eme:jfrcpp:v:20:y:2012:i:2:p:169-181
    DOI: 10.1108/13581981211218315
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    References listed on IDEAS

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    1. Mohd Hassan Che Haat & Rashidah Abdul Rahman & Sakthi Mahenthiran, 2008. "Corporate governance, transparency and performance of Malaysian companies," Managerial Auditing Journal, Emerald Group Publishing, vol. 23(8), pages 744-778, September.
    2. Panagiotis Staikouras & Christos Staikouras & Maria-Eleni Agoraki, 2007. "The effect of board size and composition on European bank performance," European Journal of Law and Economics, Springer, vol. 23(1), pages 1-27, February.
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    5. Huang, Chi-Jui, 2010. "Board, ownership and performance of banks with a dual board system: Evidence from Taiwan," Journal of Management & Organization, Cambridge University Press, vol. 16(2), pages 219-234, May.
    6. Kim Hawtrey, 2009. "The Global Credit Crisis: Why Have Australian Banks Been So Remarkably Resilient?," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 16(3), pages 95-112.
    7. Eralp Bektas & Turhan Kaymak, 2009. "Governance Mechanisms and Ownership in an Emerging Market: The Case of Turkish Banks," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 45(6), pages 20-32, November.
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