The Effect of Corporate Governance on the Degree of Agency Cost in the Korean Market

Lee, Younghwan; Tulcanaza-Prieto, Ana Belén

doi:10.3390/risks12040059

Cited by 2 publications

(1 citation statement)

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“…The agency theory posits that the separation of ownership and control in modern corporations can lead to conflicts of interest between shareholders (principals) and managers (agents) (Jensen and Meckling 2019). This controversy exists as a result of a conflict of interest and arises when agents abuse their job roles and power to maximize their self-interests at the expense of the shareholders and thus increase agency costs (Lee and Tulcanaza-Prieto 2024). The study by Osei-Baidoo et al (2023) examined how certain corporate governance attributes, such as board diversity, board size, and CEO duality, can help mitigate agency problems and enhance bank performance.…”

Section: Agency Theorymentioning

confidence: 99%

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

Awad,

Gharios,

Abu Khalaf

et al. 2024

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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.

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Section: Agency Theorymentioning

confidence: 99%

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

Awad,

Gharios,

Abu Khalaf

et al. 2024

Risks

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Key Determinants of Corporate Governance in Financial Institutions: Evidence from South Africa

Khoza,

Makina,

Makoni

2024

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The purpose of this study was to examine the key determinants of corporate governance in selected financial institutions. Using South African financial institutions as a unit of analysis, namely insurance companies and banks, the study employed a panel generalised method of moments (GMM) model using a data set for the period from 2007 to 2020, to assess key determinants of corporate governance proxies identified for the study. The study sampled 21 South African financial institutions composed of Johannesburg Securities Exchange (JSE) listed and unlisted banks and insurance companies. To measure corporate governance, the study developed a composite index employing the principal components analysis (PCA) method. The findings revealed a positive and significant association between the corporate governance index and its lagged variables. Furthermore, a significant and positive link was found between the efficiency ratio and corporate governance index and capital adequacy ratio (CAR); corporate governance index and firm size; corporate governance index and leverage ratio (LEV); and corporate governance index and return on assets (ROA). However, a negative and significant correlation was found between financial stability and the corporate governance index. The link between return on equity (ROE) and corporate governance was insignificant. A small cohort of financial institutions was excluded because it was challenging to obtain complete annual reports to extract the required data. The study was limited to only five corporate governance measures, namely board diversity, board size, board composition (independent non-executive directors and non-executive directors), and board remuneration. The findings are anticipated to persuade developing countries to pay special attention to how corporate governance is measured.

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The Effect of Corporate Governance on the Degree of Agency Cost in the Korean Market

Cited by 2 publications

References 50 publications

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

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

Key Determinants of Corporate Governance in Financial Institutions: Evidence from South Africa

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