Impact of Corporate Governance on Banks Performance

Fatemeh Mandanei, Zahra Moradi, Mohammad Hamed Khanmohammadi

Abstract


Weak and ineffective corporate governance mechanisms in banks are pointed out as the main factors contributing to the recent financial crisis. Deep changes in this area are necessary to reinforce the financial sector stability. The purpose of this study is to survey the relationship between corporate governance mechanisms and Iranian listed banks performance during the years 2010-2015. The dependent variable of this study is financial performance of banks. That is a function of capital adequacy. According to CAMEL rating system, a high capital adequacy ratio is a symbol of healthy activity of banks and has a great weight on CAMEL rating. The independent variables are included the size of the board, the proportion of independent directors, the proportion of ownership of Institutional shareholders, the proportion of ownership of major shareholders and separation between CEO and  chairman. After collecting data, we have used descriptive and regression model for analyzing data. The model for testing the hypothesis is multiple linear regressions. The result of this study according to multiple regression shows that only the proportion of ownership of Institutional shareholders  have  a positive  impact on Capital Adequacy of banks and there is not any relationship between other independent variables and capital adequacy of banks.

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