The Impact of Corporate Governance and Political Connectedness on the Financial Performance of Lebanese Banks during the Financial Crisis of 2019–2021

Abstract

The Lebanese banking sector has become risky due to political and economic crises. At such times, corporate governance mechanisms ensure objectivity of assessment and rationality in decision making. We examine the impact of internal corporate governance mechanisms on the performance of Lebanese banks, with political involvement in the administration and ownership of the banks. We used linear regression on a sample of 194 bank-year observations from 2016 to 2021. The presence of independent members on boards of directors, and ownership concentration due to family ownership, had positive effects on bank return on assets, return on equity, liquidity levels, and loans issued. Efficient control, along with the presence of audit, and compliance committees reduced risk by increasing capital adequacy and reducing non-performing loans. Both administrative political connections and ownership political connections increased return on assets, increased return on equity, increased liquidity levels, and increased loans to deposits, while increasing non-performing loans. Agency conflicts suggest that granting loans due to political pressure increased non-performing loans.

Impact of the economic crisis on the health-related quality of life of adults in Lebanon: An observational cross-sectional study

“…The economic crisis in Lebanon harmed people's life due to hyperinflation making basic goods and services unaffordable for many people, unemployment, poverty and food insecurity, political instability, and brain drain. 10,19 All these factors weakened the country's economy and can explain the low QoL scores reported in this study. In contrast to the period before the crisis, 20 the scores in both the PC and MC domains were lower among participants but comparable with the ones reported among healthcare students in the same period.…”

“…Lebanon is facing an economic crisis that started in 2019 and has been exacerbated by political instability and the Coronavirus disease of 2019 (COVID- 19) pandemic. 1 The crisis has resulted in a steep devaluation of the Lebanese pound 2 rising inflation, 3 high unemployment rates, and a severe shortage of basic goods such as fuel, medicine, and food.…”

Effect of board quality on the financial performance of conventional and Islamic banks: international comparative study after the Subprime crisis

“…Indeed, El-Chaarani (2014) examined the impact of CEO duality on Lebanese FP' banks from 2006 to 2010. He applied a quantitative method of data analysis on 182 observations.…”

“…Nevertheless, by performing multiple linear regressions, El-Chaarani (2014) analyzed the impact of CEO duality on banks' FP in Lebanon using data from 40 Lebanese banks during 2006–2010. As a result, he revealed that CEO duality affected negatively and significantly Lebanese banks' FP.…”

Formulation of a corporate governance index for banking sector: The GIB.X62

“…Looking at the corporate governance literature, the need to improve the systems has been widely discussed to reduce risks in the financial services sector. Studies have shown that performance of banks has been correlating with efficient corporate governance processes [ [8] , [9] , [10] , [11] ]. To address the agency problems in the sector several authors have recommended that banks should work towards improving governance structures [ [11] , [12] , [13] , [14] ].…”