Corporate Governance and Efficiency of Rural and Community Banks (RCBs) in Ghana
AbstractCorporate governance crises that occur in the banking sector normally cripple economies and bring many hardships to individuals, corporate entities, communities, and the nation at large. In this study, we sought to examine the level of technical efficiency and productivity growth of rural and community banks (RCBs) and the impact of corporate governance indicators on the RCBs' efficiency performance in Ghana. A sample of 70 out of 140 RCBs was selected based on the ARB Apex Bank's performance ratings and data availability. Data envelopment analysis (DEA) was used to determine the technical efficiency scores of the selected RCBs. In the second stage of the analysis, these computed efficiency scores were regressed on the corporate governance variables to assess the effects of the latter. The findings from the DEA approach show that 11% to 20% of the sampled RCBs in Ghana operate close to the efficiency frontier, whereas the majority - about 65% to 81% - underperformed within the study period of 2007 to 2013. The study further established that the number of board members, frequency of board meetings, and corporate social responsibility have significant influence on RCB efficiency.
Adnan, M.A., Htay, SNN, Rashid, H.M.A. &Meera, A.K.M., (2011), A Panel Data Analysis on the Relationship between Corporate Governance and Bank Efficiency, Journal of Accounting, Finance and Economics,vol.1, No.1, pp. 1-16
Abbott, L. J., Parker, S., Peters, G. F., & Raghunandan, K. (2003). The association between audit committee characteristics and audit fees. Auditing: A Journal of Practice & Theory, 22(2), 17-32.
Ameer, R., Ramli, F., & Zakaria, H. (2010). A new perspective on board composition and firm performance in an emerging market. Corporate Governance, 10(5), 647-661.
Anderson, C. W., & Campbell, T. L. (2004). Corporate governance of Japanese banks. Journal of Corporate Finance, 10(3), 327-354.
Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management science, 30(9), 1078-1092.
Black, B. S., Love, I., & Rachinsky, A. (2006). Corporate governance indices and firms' market values: Time series evidence from Russia. Emerging Markets Review, 7(4), 361-379.
Cadbury Report, (1992), ‘Financial aspects of corporate governance. Available from http:// www.wikipedia.com/. (Accessed February 19, 2014)
Cadbury, A. (1997) Summing up the Governance Reports, Corporate Board, 18, 6-13.
Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European journal of operational research, 2(6), 429-444.
Chughtai, M. W., & Tahir, W. A. (2015). Effects of Corporate Governance on Organization Performance: Evidence from Banking Sector of Pakistan. IOSR Journal of Business and Management, 17(3), 75-82.
Clarkson, M.B.E., (1994). A risk based model of stakeholders theory: Toronto. Proceedings of the Second Toronto Conference on Stakeholder Theory, Centre for Corporate Social Performance and Ethics, University of Toronto: Toronto.
Coleman-Kyereboah, A.,(2007). Corporate Governance and Firm Performance in Africa: A Dynamic Panel Data Analysis, studies in Economics and Econometrics, 32(2), 1-24
Conger, J. A., Finegold, D., & Lawler, E. E. (1998). Appraising boardroom performance. Harvard business review, 76, 136-164.
Cornett, M. M., Guo, L., Khaksari, S., & Tehranian, H. (2010). The impact of state ownership on performance differences in privately-owned versus state-owned banks: An international comparison. Journal of Financial Intermediation, 19(1), 74-94.
De Andres, P., & Vallelado, E. (2008). Corporate governance in banking: The role of the board of directors. Journal of banking & finance, 32(12), 2570-2580.
De Zoort, F.T., Hermansonm D.R., Archambeault, D.S. & Reed, S.A., (2002). Audit committee effectiveness; a synthesis of the empirical audit committee literature, Journal of Accounting Literature, 21(3), 38-75.
Deakin, S., & Hughes, A. (1997). Comparative corporate governance: an interdisciplinary agenda. Journal of Law and Society, 24(1), 1-9.
Donaldson, L. and Davis, J.H., 1994. Boards and company performance‐research challenges the conventional wisdom. Corporate governance: An international review, 2(3), pp.151-160.
Fidanoski, F., Mateska, V., & Simeonovski, K. (2014). Corporate governance and bank performance: Evidence from Macedonia. Economic analysis, 47(1-2), 76-99.
Hawley, J. P., & Williams, A. T. (1996). Corporate governance in the United States: the rise of fiduciary capitalism. School of Economics and Business Administration.
Keong, L. C (2002). Corporate governance: An Asia-Pacific critique (ed.), Sweet & Maxwell Asia, Hong Kong.
Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of accounting and economics, 33(3), 375-400.
Kuznecovs, M., & Pal, S. (2012). Does corporate governance reform necessarily boost firm performance? Recent evidence from Russia.
Lacker, D. F., & Tayan, B. (2014). Corporate governance according to Charles T. Munger. Rock Center for Corporate Governance.
Levrau, A., & Van den Berghe, L. A. (2007). Corporate governance and Board Effectiveness: beyond formalism. ICFAI Journal of Corporate Governance, 6(4), 58-85.
Love, I., & Rachinsky, A. (2007). Corporate governance, ownership and bank performance in emerging markets: evidence from Russia and Ukraine. World Bank, Working Paper.
Mayer, C. (1997). Corporate governance, competition, and performance. Journal of Law and Society, 24(1), 152-176.
Millstein I R & McAvoy P W (2003), The Recurrent Crisis in Corporate Governance, Palgrave MacMillan, New York.
Murillo‐Zamorano, L. R. (2004). Economic efficiency and frontier techniques. Journal of Economic surveys, 18(1), 33-77.
Ntim, C. G., & Oseit, K. A. (2011). The impact of corporate board meetings on corporate performance in South Africa. African Review of Economics and Finance, 2(2), 83-103.
OECD. 2004. Principles of corporate governance. Paris: OECD. Available [Online] at http://www.oecd.org. Accessed on February 2017
Paxton, J. (2003). A poverty outreach index and its application to microfinance. Economics Bulletin, 9(2), 1-10.
Pease G & McMillan K (1993), The Independent Non-Executive Director, Longman Professional, Melbourne, Australia.
Pokrashenko, P. (2012). Cost efficiency of Russian banks: the impact of board of directors and executive group. Economics Education and Research Consortium, 2-31.
Poudel RP, Hovey M. Corporate Governance and Efficiency in Nepalese Commercial Banks (2013). International Review of Business Research Papers, 53-64.
Rao, K. S., & KerebihDesta, K. (2016). Corporate Governance and Financial Performance: A study with reference to Commercial Banks in Ethiopia. IJAR, 2(8), 551-557.
Romano, G., Ferretti, P., & Rigolini, A. (2012, September). Corporate governance and performance in Italian banking groups. In Paper to be presented at the International conference (pp. 1-35).
Ross, S. A., Westerfield, R.W., Jaffe, J., (2005). Corporate Finance, 7th edition. McGraw Hill Irwin, New York.
Sarbanes, P. (2002, July). Sarbanes-oxley act of 2002. In The Public Company Accounting Reform and Investor Protection Act. Washington DC: US Congress.
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The journal of finance, 52(2), 737-783.
Stepanova, A., & Ivantsova, O. (2013). Does corporate governance have an effect on performance in the European banking sector? Evidence from a crisis environment. Higher School of Economics Research Paper No. WP BRP 10/FE/2012. Available [online] at SSRN: https://ssrn.com/abstract=2202096 or http://dx.doi.org/10.2139/ssrn.2202096
Tai, L. (2015). The impact of corporate governance on the efficiency and financial performance of GCC national banks. Middle East Journal of Business, 10(1), 12-16.
Copyright (c) 2018 Econometric Research in Finance
This work is licensed under a Creative Commons Attribution 4.0 International License.