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

Author

Listed:
  • Antoine B. Awad

    (Accounting and Finance Department, College of Business, University of Doha for Science and Technology, Doha P.O. Box 24449, Qatar)

  • Robert Gharios

    (Marketing Department, College of Business, University of Doha for Science and Technology, Doha P.O. Box 24449, Qatar)

  • Bashar Abu Khalaf

    (Accounting and Finance Department, College of Business, University of Doha for Science and Technology, Doha P.O. Box 24449, Qatar)

  • Lena A. Seissian

    (Manoogian Simone College of Business and Economics, American University of Armenia, Yerevan 0019, Armenia)

Abstract

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.

Suggested Citation

  • Antoine B. Awad & Robert Gharios & Bashar Abu Khalaf & Lena A. Seissian, 2024. "Board Characteristics and Bank Stock Performance: Empirical Evidence from the MENA Region," Risks, MDPI, vol. 12(5), pages 1-23, May.
  • Handle: RePEc:gam:jrisks:v:12:y:2024:i:5:p:81-:d:1394486
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    References listed on IDEAS

    as
    1. Bashar Abu Khalaf & Antoine B. Awad & Scott Ellis, 2024. "The Impact of Non-Interest Income on Commercial Bank Profitability in the Middle East and North Africa (MENA) Region," JRFM, MDPI, vol. 17(3), pages 1-15, March.
    2. Kojima Koji & Bishnu Kumar Adhikary & Le Tram, 2020. "Corporate Governance and Firm Performance: A Comparative Analysis between Listed Family and Non-Family Firms in Japan," JRFM, MDPI, vol. 13(9), pages 1-20, September.
    3. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    4. Paul Guest, 2009. "The impact of board size on firm performance: evidence from the UK," The European Journal of Finance, Taylor & Francis Journals, vol. 15(4), pages 385-404.
    5. Omer Saeed Habtoor, 2022. "Board Attributes and Bank Performance in Light of Saudi Corporate Governance Regulations," JRFM, MDPI, vol. 15(10), pages 1-27, September.
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