Composition Of Board Of Directors And Its Effects On Service Delivery And Firm Performance In The Ghanaian Banking Industry

ABSTRACT

Following the extensive financial crises with its resultant collapse of some world leading businesses, the concept of corporate governance has received considerable attention in both industrial and academic circles. The role of board of directors in the death and survival of corporate entities has become a key component of the corporate governance architecture. The study examines the composition of board of directors and its effects on service delivery and firm performance in the Ghanaian banking industry. It also in addition explores how service delivery and firm performance differ with respect to ownership identities. The cross-sectional panel survey purposively draws a sample of fourteen banking firms over the 2008 and 2013 year period. This period is key for seeing the recent historic oil find in the country requiring some legal and regulatory changes in the financial sector as well as its beginning marking the recent economic down-turn in the world. From four aims, four study hypotheses were formulated and examined. Firm performance and service delivery was measured using Return on Assets (ROA), Return on Equity (ROE), Net Interest Margin (NIM) and Fees Operating Income (FEEOP). Spearman findings indicate some validity and support for the relevance of corporate governance to firm performance in the Ghanaian banking industry. Using the GMM, fixed and random effect econometric models, board size and the presence of independent non-executive directors were observed to have significant positive effects, whilst board member political attachment was found to have a profound significant adverse influence on firm performance. The results whilst further suggesting that female members and foreign national presence on one hand promote the effectiveness of firms, proved inconclusive on whether age and business and economics competence other than experience and skill diversity promote performance. Meanwhile, no significant differences were observed between ownership identity and firm performance. The study recommends that governance and board structure, literacy, discipline and social awareness need to be fully strengthened to desired governance echelons since Ghanaian banks have proven not very committed to all spheres of corporate governance. Boards must maintain a strong and independent structures with the call especially on state entities to eschew excessive government appointments onto their boards. To promote trust and boost investor confidence, local firms are encouraged to learn from the MNCs and provide detailed governance reports in their annual reports. In sum, there is the need to formulate a national corporate governance code that requires not only adopting universal principles but governance adaptations more suitable and tailored to the specific socio-economic needs of the country.