Do disclosure and transparency affect

bank’s financial performance?

Isaiah Oino

Isaiah Oino is based at Abstract

Business School, Faculty of Purpose – The purpose of this paper is to examine the impact of transparency and disclosure on the
Business and Law, financial performance of financial institutions. The emphasis is on assessing transparency and
Coventry University, disclosure; auditing and compliance; risk management as indicators of corporate governance; and
Coventry, UK. understanding how these parameters affect bank profitability, liquidity and the quality of loan portfolios.
Design/methodology/approach – A sample of 20 financial institutions was selected, with ten
respondents from each, yielding a total sample size of 200. Principal component analysis (PCA), with
inbuilt ability to check for composite reliability, was used to obtain composite indices for the corporate
governance indicators as well as the indicators of financial performance, based on a set of questions
framed for each institution.
Findings – The analysis demonstrates that greater disclosure and transparency, improved auditing and
compliance and better risk management positively affect the financial performance of financial
institutions. In terms of significance, the results show that as the level of disclosure and transparency in
managerial affairs increases, the performance of financial institutions – as measured in terms of the
quality of loan portfolios, liquidity and profitability – increases by 0.3046, with the effect being statistically
significant at the 1 per cent level. Furthermore, as the level of auditing and the degree of compliance with
banking regulations increases, the financial performance of banks improves by 0.3309.
Research limitations/implications – This paper did not consider time series because corporate
governance does not change periodically.
Practical implications – This paper demonstrates the importance of disclosure and transparency in
managerial affairs because the performance of financial institutions, as measured in terms of loan
portfolios, liquidity and profitability, increases by 0.4 when transparency and disclosure improve, with this
effect being statistically significant at the 1 per cent level.
Originality/value – The use of primary data in assessing the impact of corporate governance on
financial performance, instead of secondary data, is the primary novelty of this study. Moreover, PCA is
used to assess the weight of the various parameters.
Keywords Corporate governance, Financial performance, Principal component analysis,
Financial institutions
Paper type Research paper

Introduction
The wave of corporate scandals that swept across the business world over the past decade in
both Europe and the USA (e.g. Société Général, Lehman Brothers, etc.) has raised questions
as to what type of board structure and composition can best monitor and control the activities
of an organisation’s management. The management of many well-known companies was
found to be engaged in dubious, questionable and even fraudulent accounting practices,
which their boards were not able to detect in time. Fraud, mismanagement and poor
monitoring of agents’ activities resulted in a lack of transparency and accountability, making
highly influential companies vulnerable to litigation and corporate failure. This situation has led
Received 10 December 2018
Revised 17 June 2019
to the creation of a set of regulatory codes and corporate governance reports, whose aim was
Accepted 26 June 2019 to ensure effective governance and improve the overall performance of major firms.

PAGE 1344 j CORPORATE GOVERNANCE j VOL. 19 NO. 6 2019, pp. 1344-1361, © Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-12-2018-0378
Wilson (2006) noted that poor corporate governance can lead to the loss of market confidence
in the ability of banks to properly manage their assets and liabilities, which could in turn trigger
liquidity crises. The strength of the corporate governance mechanisms of financial institutions
determines the robustness of the financial system and its vulnerability to uncertainty and risks.
A study by Drobetz et al. (2003) showed that good corporate governance can lead to higher
valuations; profitability and sales growth; and lower capital expenditure. The basic building
blocks of corporate governance structures include directors, accountability and audits,
directors’ remuneration, shareholder oversight and AGMs. Cadbury (1992), Greenbury (1995)
and Hampel (1998) identified the need for greater transparency and accountability in areas
such as board structure and operation, directors’ contracts and board monitoring. In addition,
they all stressed the importance of the role of non-executive directors. Previous research by
Acero and Alcalde (2012) and Farag and Mallin (2019) showed that the structure and
composition of boards is usually determined by the characteristics of the company, its
environment and its information needs. In general, board structures are usually the function of
the costs and benefits of monitoring. This paper follows the example of Njekang and Afuge
(2017) in Cameroon, who analysed the impact of corporate governance on the financial
performance of credit unions.
The interaction between good corporate governance practices and corporate social
responsibility (CSR) disclosure, as a transparency mechanism, neither has been analysed
extensively nor has the effect of this specific mechanism on financial performance (Jain and
Jamali, 2016). Baumann and Nier (2004) greater disclosure reduces overall risk and boosts
risk-adjusted returns. Galbreath (2006), meanwhile, reported that full and open disclosure
via triple bottom line reporting enhances both transparency and accountability. These are
all highly important topics in the current banking environment post the global financial crisis.

Research objectives
The main objective of this study is to determine the effects of key aspects of corporate
governance on the financial performance of financial institutions. Specifically, it seeks to:
! assess the effects of board role and composition on the financial performance of
financial institutions based in London;
! examine the impact of transparency and disclosure on the financial performance of
these financial institutions; and
! evaluate the effects of improved auditing and compliance, as well as risk management,
on the financial performance of these financial institutions.

Research hypotheses
This study seeks to test the null hypotheses that:
H1. Board role and composition have no effect on the financial performance of financial
institutions in London.
H2. Transparency and disclosure do not affect the financial performance of financial
institutions.
H3. Improved auditing and compliance have no effect on the financial performance of
financial institutions.
H4. Risk management has no effect on the financial performance of financial institutions.

Review of the literature

Governance in the banking industry changed dramatically in the 1990s because of
significant changes in ownership that came about as a result of mergers and

VOL. 19 NO. 6 2019 j CORPORATE GOVERNANCE j PAGE 1345

 acquisitions (Arouri, 2011). A good system of corporate governance will facilitate the
resolution of corporate conflicts between minority and controlling shareholders,
between executives and shareholders and between shareholders and other
stakeholders. Therefore, the key objective of efficient corporate governance is to
protect the interests of shareholders and various other stakeholders, including
customers, suppliers, employees and society at large, and to ensure full transparency
and integrity in communication, while making available complete, accurate and clear
disclosure to all the parties concerned (Shukla, 2008).
The financial crisis of 2008-2009, which originated in the USA and affected most of
developed economies, was at least partly the result of poor or loose corporate governance.
The chief cause of the subprime mortgage crisis, which subsequently led to the global
financial meltdown, was excessive risk taking. Excessive risk-taking hinges on the agency
problem. Agency theory posits that a large board can be less efficient than a small board
due to a rise in agency conflicts because of inefficient communication and cooperation
costs (Jensen, 1993). However, Pfeffer (1972) noted that board size is positively linked to
the performance of large firms. This is because large firms have a greater need for board
members with diverse experience and expertise.
Pathan and Faff (2013) studied the impact of board size on the performance of US BHCs for
the period 1997-2011. The study indicated a negative relationship between board size and
performance as estimated by Tobin’s Q, return on assets (ROA), return on equity (ROE) and
pre-tax operating income. In contrast, an analysis of 35 BHCs by Adams and Mehran
(2012) for the period 1965-1999 concluded that board size is positively related to bank
performance as estimated by Tobin’s Q and ROA ratios. Similar results (indicative of a
positive association between board size and performance) were also noted by Merendino
and Melville (2019).
A diversified board requires both executive and non-executive directors. Busta (2007)
analysed the impact of non-executive directors on the decision-making process of a sample
of European banks. The results indicated that there is a positive association between the
presence on the board of non-executive directors and firm performance in terms of return
on invested capital and market-to-book values. Moreover, Tanna et al. (2011) examined the
impact of board independence on the performance, as estimated using various efficiency
measures, of 17 UK banking institutions for the period 2001-2006, and found a positive and
significant relationship between board independence and bank efficiency. However,
according to the “stewardship” theory (Donaldson, 1990), there is no conflict between the
interests of shareholders and managers.
A wider study by Tandelilin et al. (2007) examined the correlation between corporate
governance and risk management on the one hand and bank performance on the other,
using a sample of 51 Indonesian banks for the period 1999-2004. The study revealed that
bank ownership affects the relationship both between corporate governance and bank
performance and corporate governance and risk management. Risk management refers to
the process by which an organisation identifies and analyses threats, examines alternatives
and accepts or mitigates those threats even before they begin to impede the activities of the
organisation. Similarly, Culp (2008) argued that risk management is one of the key
characteristics of successful companies, and that it enables firms to address risks through
specific pre-planned activities. Kittipat and Nopadol (2014) analysed the relationship
between risk management systems, performance measurement systems and the financial
performance of Thai listed companies. The researchers collected data from individuals who
were directly responsible for these systems, and the total number of respondents was 101.
The results of the study suggested that risk management systems and performance
measurement systems have a weak positive correlation with the financial performance of an
organisation as measured by ROA, ROE and earnings per share.

PAGE 1346 j CORPORATE GOVERNANCE j VOL. 19 NO. 6 2019

Impact of transparency and disclosure on financial performance
Transparency and the disclosure of information are considered essential elements of
corporate governance (Henry, 2008). Transparency requires that a company adopts an
accurate accounting method, makes full and prompt disclosure of company information and
discloses any conflicts of interest that its directors or controlling shareholders may have.
Disclosure, meanwhile, has many aspects and includes the release of information on board
and management structures, ownership structures and financial operations and performance.
As regards the extent of disclosure, Mensah (2016) argued that board independence is a
significant variable that can explain the disclosure of internal control measures. Interestingly,
Ghazali (2007) found that companies in which directors held the majority of the shares disclosed
less information about CSR activities than those companies in which the government was a
major shareholder. Therefore, unless companies view CSR disclosure as a social contract that
reflects “societal expectations,” the extent of disclosure is likely to be minimal (Moir, 2001).
Collett (2005) reported that companies providing more governance-related information
voluntarily also tend to have a lower cost of equity capital. It was also noted by Toksal
(2004) that corporate governance disclosures typically reduce the cost of capital.
According to Habib (2008), disclosure policy is a definite predictor of the interrelation
between corporate governance and firm performance. Moreover, Zaman et al. (2015)
considered voluntarily disclosure as one of the corporate governance mechanisms that can
enhance operating performance. However, Habib (2008) found no particular correlation
between corporate governance and profitability, whereas Bushman and Smith (2001),
Hassan (2012) and Fung (2014) found a positive relationship between CSR disclosure and
a company’s market value and financial performance. Fuertes-Callen et al. (2014) found a
similar relationship between CSR disclosure, as a proxy for transparency, and financial
performance. Meanwhile, Longo et al. (2005) claimed that most companies disclose their
CSR activities mainly to enhance their image and not necessarily out of a sense of corporate
citizenship. Jorge and Deepa (2011) concurred with this notion, arguing that companies
engage CSR activities not only to improve their financial performance and satisfy
stakeholder demands but also to enhance their corporate reputation.
Sen (2011) analysed 50 listed Indian companies to determine the extent of corporate
governance disclosure. He developed an index consisting of 67 parameters that reflected
Clause 49 of the Indian Listing Agreement. ROE and ROA were used as profitability
indicators. The paper concluded that there was considerable scope for improvement in
corporate governance disclosure practices, as the difference between the quality and
quantity of disclosures made by the companies was significant. The study also found that
the size of a company was a significant determinant of the scope of its corporate
governance disclosure. Larger companies showed greater disclosure compared to smaller
ones. A similar effect of size on CSR disclosure in banking was noted by Kilic et al. (2015).
Kamal (2012) examined 95 UAE-listed corporations to measure the extent of corporate
governance disclosures made by those firms. The results showed that the extent of
disclosure was similar across almost all economic sectors (industry, banking, insurance and
services) in the UAE. The highest level of disclosure was in relation to management
structures and transparency, while the lowest level was in relation to external auditing and
non-audit services. The level of disclosure in relation to transparency and management
structures was found to be significantly different across the various sectors.

Research methodology/approach
This study adopted a cross-sectional survey-based research design. This design is both
exploratory and causal because it examines the relationships between variables and the
effects of corporate governance indicators on financial performance.

VOL. 19 NO. 6 2019 j CORPORATE GOVERNANCE j PAGE 1347

 Principally, primary sources of data were used, acquired using well-structured questionnaires,
which as the main research instrument were administered to the respondents. The respondents
included board members, committee members, staff members and certain enlightened
members of the financial institutions. All of the respondents had a financial background. Though
not a time series study, some secondary data were also collected, mainly from the annual
reports of the financial institutions, regarding their indicators of performance.
The study population comprised 20 financial institutions in the City of London registered with
the Ministry of Finance, which were selected using purposive sampling techniques. A total of
ten respondents from each, involved in management (board and staff) or as members, were
sampled, thus raising the total sample size to 200. All of the respondents were purposively
selected to ensure that they had similar backgrounds and had experience in and knowledge
of corporate governance, so that a basic common view could be garnered. We chose only
banks in the UK (operating under the same legal framework) to limit the issue of heterogeneity.
Therefore, the cross-sectional effects were not significant. Being a cross-sectional study, our
data relate to 2018. Black et al. (2006) suggested one-year studies in governance research, as
governance does not change radically over time (sticky governance). As the chosen financial
institutions were of different size, we controlled for size before doing any meaningful analysis.
We measured bank size using the natural logarithm of total assets.

Model specification
The model used for this study was one of multiple regression analysis designed to assess the
impact of corporate governance on firm performance, as measured by the different indicators.
These indicators included board role and composition (BRC), transparency and disclosure
(TD), auditing and compliance (AC) and risk management (R). Financial performance as the
main dependent variable is denoted by (FP), with the relevant indicators being Profitability (P),
Loan Portfolio (LP) and Liquidity (L), as illustrated by Njekang and Afuge (2017).
Profitability and governance equation. This being our base model, the objective was to
understand the need for improved corporate governance as a way of enhancing
performance. Large banks are likely to have a large board of directors compared to small
banks. These large boards are likely to have members drawn from diverse backgrounds,
including gender, age, experience and qualifications, whereas small banks are likely to
have a leaner board of directors with less diversification.

! "
P ¼ f Aa0 ; BRCa1 ; TDa2 ; ACa3 ; Ra4 ; e m

linearised as:

Profi ¼ a0 þ a1 lnBRCi þ a2 lnTDi þ a3 lnACi þ a4 lnRi þ Size þ m (1)

Loan portfolio and governance equation. In this section, our task was to assess whether CG
determines the nature of a bank’s loan portfolio. The assumption was that a strong and well-
diversified board of directors would evaluate the bank’s lending behaviour and determine
an appropriate pattern.

! "
LP ¼ f A b 0 ; BRC b 1 ; TD b 2 ; AC b 3 ; R b 4 ; e m ;

LPi ¼ b 0 þ b 1 lnBRCi þ b 2 lnTDi þ b 3 lnACi þ b 4 lnRi þ Size þ e (2)

Liquidity and governance equation.

! "
L ¼ f Al 0 ; BRCl 1 ; TDl 2 ; ACl 3 ; Rl 4 ; e m
Li ¼ l 0 þ l 1 lnBRCi þ l 2 lnTDi þ l 3 lnACi þ l 4 lnRi þ Size þ W (3)

PAGE 1348 j CORPORATE GOVERNANCE j VOL. 19 NO. 6 2019

These three functions have been summarised into a single one that shows the effects of
Corporate Governance on Financial Performance in the following Governance–Financial
Performance function:

! "
FP ¼ f Ap 0 ; BRCp 1 ; TDp 2 ; ACp 3 ; Rp 4 ; e m

where BRC is Board role and composition, TD is transparency and disclosure, AC is

auditing and compliance and R is risk management in the equations (1) to (3). A priori, it is
expected that all the parameter estimates should not be zero.

Findings
Our data were fairly distributed in terms of gender and position within the company.
However, most (52 per cent) of the respondents were aged between 41 and 50. The reason
for ensuring fairly distributed data is to avoid any skewness. As shown in Appendix 2, 56
per cent of the respondents had more than 10 years’ experience in the banking industry.
Examining the relationship that existed between the different indicators of corporate
governance in this study was fundamental to explaining the impact of one on another. It is
worth reiterating here that four indicators of corporate governance and three indicators of
financial performance were used for this study. The retained questions were those that
explained the different components of both corporate governance and financial
performance. The results are presented in line with the principal component analysis (PCA)
rankings of the components of corporate governance and financial performance, as shown
in Table I.
One of the diagnostic tests conducted on the variables was to assess the presence of
multicollinearity. multicollinearity is where the correlation is above 0.75. The value of regular
staff performance evaluations and their relationship with firm performance is well-
documented in the literature (Kilduff et al., 2000; Higgs, 2005). Our results show a strong
positive relationship between regular staff performance evaluation (RSPE) and regular
defined cash ceiling (RDCC) (0.6110), implying that regular staff evaluations and the
presence of credible guarantors in their files can greatly reduce the risk of poor cash
management and unauthorised cheque withdrawals, thus improving overall cash
management. Equally, if bank staff are trained and evaluated regularly (RSPE), inter-branch
reconciliation is likely to be optimised (inter-bank reconciliation [RBI]), thus minimising
possible fraud and errors. This explains the strong positive relationship between RSPE and
RBI. The explanation is the same for all the values presented for the different relationships in
Table I. This strong positive relationship is an indication that risk management is a
fundamental indicator of corporate governance and affects financial performance.

Table I Pair-wise correlation (risk management and transparency, and disclosure)

Variable RSPE RLPB RDCC RLRF RBI TDPI TIDP

RSPE 1.0000
RLPB 0.5231 1.0000
RDCC 0.6110 0.5780 1.0000
RLRF 0.6102 0.5980 0.6003 1.0000
RBI 0.6812 0.5901 0.6419 0.6108 1.0000
TDPI 0.05092 0.4409 0.4187 0.3765 0.4107 1.0000
TIDP 0.5987 0.5875 0.6100 0.4880 0.5401 0.6319 1.0000
Notes: (RSPE: Regular staff performance evaluation, RLPB:Risk management, RDCC: Regular
Defined Cash Ceiling RLRF: Loan recovery task force, RBI: inter-bank reconciliation, TDPI:
Transparency and declaration of personal interest, TIDP: Transparency and information disclosure
policy)

VOL. 19 NO. 6 2019 j CORPORATE GOVERNANCE j PAGE 1349

 Table II presents the relationships that exist between the variables of the three different
components cited above. It is worth noting that, in line with PCA component rankings, the
strength of the relationship decreases as we move from one component to the other. The
strength of the relationship, for instance, drops as we move from risk management to
transparency and disclosure. The relationship between timely up-to-date report (TMUR) and
asset acquisition procedures (TAAP) is a strong and positive one (0.5008), implying that
regular reporting is required (TMUR) so that the members can closely monitor the relevant
procedure and the quality of the assets acquired (TAAP). There is also a strong positive
relationship (0.5109) between regular presentations of financial reports (TMUR) and the
ability of the auditors to interpret those reports (audit monthly report [AMR]). According to
the results, reporting (TMUR) is worthless if there is no regular monitoring by the auditors
whereby the reports can be compared with actual results from the field. This explains the
strong positive relationship (0.5041) between (TMUR) and (auditing, internal and external
by-laws [AIEB]). Moreover, the presentation of monthly reports and regular monitoring by
the auditors (AMR and AIEB) are strongly correlated to the evaluation of the value and
quality of assets acquired (TAAP). This implies that, without regular monitoring and
reporting, poor quality assets could be acquired at exorbitant prices with the aim of
satisfying self-interests. Above all, regular monitoring (AMR) without regular reporting is
worthless. This is confirmed by the strong positive relationship that links monitoring with
reporting.
Table III shows that there is a positive relationship between the separation of functions (Board
committee and staff functions [BCSF]) and board mastery of reports and staff evaluation
(Board mastery of reports [BMR] and Board evaluation of management staff [BEMS]). Staff
evaluation can easily be captured from the report of activities carried out by the staff. This is
consistent with the positive relationship that exists between BMR and BEMS.

Techniques of estimation
This study made use of the multiple regression analysis technique, as it was assumed that
the institutions could have certain differences that would not be time variant. The effects of

Table II Pair-wise correlation (transparency and disclosure; auditing and compliance; and
board role and composition)
Variable TMUR TAAP AABC AMR AIEB BIR BMG

TMUR 1.0000
TAAP 0.5008 1.0000
AABC 0.2109 0.2613 1.0000
AMR 0.5109 0.5366 0.1413 1.0000
AIEB 0.5041 0.5003 0.2418 0.6100 1.0000
BIR 0.1813 0.1006 0.2100 0.1690 0.1413 1.0000
BMG 0.3200 0.3711 0.2001 0.3210 0.3910 0.1519 1.0000
Notes: (TMUR: Timely up-to-date report, TAAP: Asset acquisition procedures, AABC: Audit on
activities of board and committee, AMR: Audit monthly report, AIEB: Auditing, internal and external
by-laws, BIR: Board interpretation of reports, BMG: Board mastery of guidelines)

Table III Pair-Wise Correlation (board role and composition)

Variable BCSF BMR BEMS

BCSF 1.0000
BMR 0.2901 1.0000
BEMS 0.5613 0.2978 1.0000
Notes: (BCSF: Board committee, and staff functions, BMR: Board mastery of reports, BEMS: Board
evaluation of management staff)

PAGE 1350 j CORPORATE GOVERNANCE j VOL. 19 NO. 6 2019

corporate governance on the financial performance of financial institutions based in London
were captured through an examination of the effects of the various indicators of corporate
governance on the dependent variable.
PCA was then conducted to examine which questions better captured the various
indicators. PCA is a variable reduction procedure. It is used when we obtain data from a
large number of variables (questions) and believe that there is redundancy in them.
Redundancy means that some of the variables are correlated with one another, possibly
because they are measuring the same construct. In performing the PCA, scores were
calculated for each subject or indicator. The scores from the questions were then weighted
optimally and summed to compute the scores for a given component or variable.

Principal component analysis results

Table IV shows the four components and their respective eigenvalues, and the proportion of
the total variance that has been retained as principals.
Table IV shows that risk management accounted for 20.01 per cent of the total variance, while
transparency and disclosure accounted for 9.41 per cent, auditing and compliance for 7.45 per
cent, and board role and composition for 3.92 per cent of the total variance. We then moved to
the next step where we arranged the factors in a hierarchical order, as shown in Table V.
We assessed the boards of directors on a number of fronts, specifically the requirement for
directors to declare their interests (TDPI), information disclosure (TIDP), availability of
monthly reports (TMUR) and procedures that evaluate the quality and value of assets
(TAAP). This was to analyse the impact of transparency and disclosure. As part of CG
requirements, it is very important that boards of directors disclose any material interest in
any particular undertaking. Disclosing information about governance is also important to
potential investors and shareholders and is a critical component of transparency.

Table IV Retained components for governance indicators and their eigenvalues

Component Eigenvalue Proportion (%) Cumulative Proportion (%)

Component 1 9.9130 20.01 27.10

Component 2 4.5127 9.41 36.51
Component 3 2.1802 7.45 43.96
Component 4 2.1007 3.92 47.88
Notes: (Component 1 is risk management, Component 2 is transparency and disclosure, Component
3 is auditing and compliance, and Component 4 is board role and composition)

Table V Loadings (eigenvectors) of retained components of governance measures

Component 1 Component 2 Component 3 Component 4
Variable Eigen Vector Variable Eigen-vector Variable Eigen-vector Variable Eigen-vector

RSPE 0.4912 TDPI #0.5129 AABC 0.3196 BIR 0.1920

RLPB 0.5219 TIDP #0.5120 AMR #0.2932 BMG 0.5619
RDCC 0.4871 TMUR #0.5194 AIEB #0.3100 BCSF 0.4331
RLRF 0.5912 TAAP #0.4100 – – BMR 0.5611
RBI 0.5129 – – – – BEMS 0.4190
Notes: (Component 1 is risk management, Component 2 is transparency and disclosure, Component 3 is auditing and compliance, and
Component 4 is board role and composition) (RSPE: Regular staff performance evaluation, RLPB: Risk management, RDCC: Regular
Defined Cash Ceiling, RLRF: Loan recovery task force, RBI: inter-bank reconciliation, TDPI: Transparency and declaration of personal
interest, TIDP: Transparency and information disclosure policy, TMUR: Timely up-to-date report, TAAP: Asset acquisition procedures,
AABC: Audit on activities of board and committee, AMR: Audit monthly report, AIEB: Auditing internal and external by-laws, BIR: Board
interpretation of reports, BMG: Board mastery of guidelines, BCSF: Board committee, and staff functions, BMR: Board mastery of
reports, BEMS: Board evaluation of management staff)

VOL. 19 NO. 6 2019 j CORPORATE GOVERNANCE j PAGE 1351

 For their part, the non-interference of the board in the presentation of audit reports (AABC),
the actual monthly presentation of audited accounts (AMR), and the internal and external
auditing by-laws (AIEB) were elements of auditing and compliance that loaded heavily in
Component 3. The importance of compliance has been identified by Tariq and Abbas
(2013), who noted a positive association between compliance and firm performance.
Compliance with regulatory requirements entails a detailed interpretation of the regulatory
framework and reports. The ability of board and committee members to interpret reports
(Board interpretation of reports [BIR]), their mastery of the guidelines for supervising
management activities (Board mastery of guidelines [BMG]), function clarity and the non-
interference of the board (BCSF), the availability of reports prior to board meetings (BMR)
and the existence of performance evaluations for staff and management succession
(BEMS) were the key constituents of board role and composition.

Principal component analysis on performance

The number of components to be retained for subsequent analysis was subject to the
Kaiser criterion being attained, according to which only components with an eigenvalue
greater than 1 are retained. The PCA results showed that up to five components were
capable of being retained. However, the first three components had high eigenvalues and
captured more variables of interest than the last two. As such, only the first three
components were extracted, with the relative proportions of the variance accounted for in
the manner displayed in Table VI.
The eigenvalues indicate that Component 1 accounted for 50.12 per cent of the total
variation in the performance of the financial institutions, whereas Component 2 accounted
for 10.11 per cent and Component 3 accounted for 7.10 per cent of that variation.
Cumulatively, these three components jointly accounted for 67.33 per cent of the variation in
the performance of financial institutions based in London. (Table VII)
The eigenvalues for each of the components reveal that the variability in the performance of
the financial institutions was determined in order of merit (as indicated by eigenvalues) by
their respective loan portfolio policies, liquidity policies and profitability aims.

Table VI Retained components for performance measures and their eigenvalues

Component Eigen value Proportion (%) Cumulative proportion (%)

Component 1 9.2331 50.12 50.12

Component 2 4.009 10.11 60.23
Component 3 2.1900 7.10 67.33

Table VII Loadings (eigenvectors) of retained components of performance measures

Component 1 Component 2 Component 3
Variable Eigenvector Variable Eigenvector Variable Eigenvector

LPCR 0.3910 LDAD 0.5104 PICR 0.3916

LPFC 0.4100 LRAD 0.3012 PMSO #0.4103
LPLP 0.3901 LMDP 0.4012 PRSM #0.4108
LPLR 0.4108 LUIA #0.1004 PCSF 0.3912
LPDL 0.4375 – – PDOI #0.4957
LPLD 0.5612 – – – –
LPWO 0.5781 – – – –
Notes: (Component 1 is loan portfolio, Component 2 is liquidity, and Component 3 is profitability)
(LPCR: Loan portfolio, interest collection rate, LPFC: Loan portfolio, fake collateral, LPLP: Loan
portfolio, quality of loan policy, LPLR: Loan portfolio, low cost of loan recovery, LPDL: Loan portfolio,
delinquency of loan, LPWO: Loan portfolio, written-off, LDAD: Liquidity, demand deposits)

PAGE 1352 j CORPORATE GOVERNANCE j VOL. 19 NO. 6 2019

Going by their eigen vectors, it can be observed that interest collection rates (loan portfolio,
interest collection rate [LPCR]), the non-existence of fake collateral documents in the bank’s
loan files (loan portfolio, fake collateral [LPFC]), up-to-date loan policies for bad debt
recovery (loan portfolio, quality of loan policy [LPLP]), the low cost of loan recovery (loan
portfolio, low cost of loan recovery [LPLR]), the low rate of loan delinquency (loan portfolio,
delinquency of loan [LPDL]), decreasing rates of loan delinquency (LPLD) and the writing-
off of loans more than one year old (loan portfolio, written-off [LPWO]) all exerted significant
influence on the loan portfolio management index. Meanwhile, the availability of deposits on
demand (liquidity, demand deposits [LDAD]), bank reserve availability (LRAD), the ease of
meeting cash demands (LMDP) and the existence of an investment account for saving
excess liquidity (LUIA) were the major determinants of liquidity preferences, while the
prompt payment of interest (PICR), meeting social obligations (PMSO), meeting reserve
requirements as a result of profitability (PRSM), cheap sources of funding relative to the
interest generated (PCSF) and rising dividend payment rates (PDOI) were the major factors
accounting for the variability in the profitability of the financial institutions based in London.
The results of the multiple regression analysis are presented in the table below. The
dependent variables were loan portfolio, liquidity and financial performance.
The results indicate that the governance indicators of board role and composition;
transparency and disclosure; auditing and compliance; and the quality of risk management
within financial institutions based in London significantly affected the financial performance
of the financial institutions, as indicated by their test statistical values, magnitude and signs.
Therefore, we reject the stated null hypotheses, except for the role and composition of
boards, which was insignificant. The impact of board composition was significant in terms
of affecting the loan portfolio, as shown in Column 1. This is in line with the findings of
Hermalin and Weisbach (2003), who noted that certain features of boards of directors can
play a vital role in determining the quality of banks’ loan portfolios. However, previous
Spanish evidence regarding the effects of board composition on earnings quality (Garcia
and Gill-de-Albornoz, 2007) indicated that grey directors (non-executive) did not seem to
play a significant role as far as the volume of information disclosed was concerned. The
differences in the results could be attributable to different interpretations of what board
composition means. In the present study, we examined board composition in terms of
gender and executive/non-executive roles. A strong mix of directors is likely to bring rich
experience and expertise, hence a positive association between board role/composition
and the quality of a loan portfolio.
The regression results in column five of Table VIII show that transparency and disclosure had
a positive and significant effect on the financial performance of the financial institutions based

Table VIII Results of the multiple regression analysis

Loan portfolio Liquidity Financial performance
Coefficient (LSE) Coefficient (LSE) Coefficient (LSE)

BRC 0.3460 $$$ (0.2001) 0.1923 (0.0930) 0.1730 (0.1331)

TD 0.1091 $$$ (0.1003) 0.8710$$$ (0.0751) 0.3046$$$ (0.4100)
AC 0.2902 $$ (0.0160) 0.9120$$$ (0.0071) 0.3309$$ (0.0031)
RM 0.2953$$$ (0.1200) 0.89518$$ (0.1740) 0.6230 $$$ (0.1006)
SIZE 0.1043$$ (0.0071) 0.4321$$$ (0.2145) 0.4100$$$ (0.1313)
_CONS 0.2975 (0.1007) 0.1096$ (0.2306) 0.7100 (0.3001)
R-squared 0.8001 0.4230 0.6950
Adjusted R-squared 0.7812 0.4035 0.6899
F stat 65.90 30.12 60.79
Prob > F 0.0000 0.0000 0.0000
(BRC: Board role and composition; TD: Transparency and disclosure; AC: Audit and compliance;
RM: risk management)

VOL. 19 NO. 6 2019 j CORPORATE GOVERNANCE j PAGE 1353

 in London. In fact, as the level of disclosure and transparency in managerial affairs increased,
the performance of the financial institutions in terms of loan portfolio, liquidity and profitability
increased by 0.3046, with the effect being statistically significant at the 1 per cent level.
Similar implications can be drawn from the sign and magnitude of the coefficient of
auditing and compliance. The auditing and compliance variable was significant in
terms of influencing the quality of the loan portfolio and liquidity. Its magnitude and sign
show that as the level of auditing within the financial institutions and the degree of
compliance with banking regulations increased, the financial performance of those
institutions increased by 0.3309. This effect was found to be statistically significant at
the 5 per cent level of significance, in line with a priori expectations. For its part, the
coefficient of the quality of risk management was positive and significant at the 1 per
cent level. Specifically, as the level of risk mitigation and management increased, there
was a tendency for financial performance to increase significantly by 0.6230, with the
effect being significant at the 1 per cent level, through the effect on the quality of the
loan portfolio, liquidity and profitability.
The results in Column 5 of Table VIII further indicate that board role and composition,
transparency and disclosure, auditing and compliance with banking regulations, and
risk management jointly accounted for approximately 69 per cent of the total variation
in the performance of the London-based financial institutions. Therefore, around 31
per cent of the overall financial performance of these financial institutions was
accounted for by the error term – other factors not modelled in the financial
performance model, such as membership and other specific characteristics of the
financial institutions. This assertion and the prescriptive power of the effect of this
linkage is ascertained plausible by the significance level of the Fisher F-ratio, whose
probability shows a 99 per cent degree of confidence in the predictions made based
on such results.
Although this work had the novelty of using primary data and PCA, it suffers from the
limitation of not having considered a longer period.

Conclusion
Financial performance is one the indicators of the extent to which a firm is meeting the
expectations of its shareholders. While satisfying the expectations of shareholders is
important, there are also a number of other competing expectations from different
stakeholders, satisfying which requires a delicate balancing act by the directors. Given that
shareholders may not be directly involved in the day-to-day management of their firm,
boards of directors act as stewardships.
The results of this study indicate that variations in boards can significantly affect the
quality of banks’ loan portfolios, and thus their financial performance. As stewards,
boards of directors are required to be transparent in their dealings. The results of this
research indicate that transparency and disclosure can have a positive and significant
effect on the financial performance of financial institutions. In the case of the London-
based banks that were the subject of this study, it was found that as the level of
disclosure and transparency in managerial affairs increased, their financial
performance in terms of the quality of loan portfolios, liquidity and profitability also
increased. One of the ways in which directors can be kept in check is through robust
auditing, as external auditors effectively act as watchdogs for shareholders. The results
of this study indicate that the level of auditing within financial institutions and the
degree of compliance with banking regulations can boost the financial performance of
such institutions.

PAGE 1354 j CORPORATE GOVERNANCE j VOL. 19 NO. 6 2019

References
Acero, I. and Alcalde, N. (2012), “Effect of the monitoring function and advisory function on board
structure”, Revista Espan~ola de Financiación y Contabilidad, Vol. 153, pp. 9-38.
Adams, R.B. and Mehran, H. (2012), “Bank board structure and performance: evidence for large bank
holding companies”, Journal of Financial Intermediation, Vol. 21 No. 2, pp. 243-267.
Arouri, M.E.H. (2011), “Does crude oil move stock markets in Europe? A sector investigation”, Economic
Modelling, Vol. 28 No. 4, pp. 1716-1725.
Baumann, U. and Nier, E. (2004), “Disclosure, volatility, and transparency: an empirical investigation into
the value of bank disclosure”, Federal Reserve Bank of New York Policy Review, pp. 31-45.

Black, B., Jang, H. and Kim, W. (2006), “Predicting firms’ corporate governance choices”, Journal of
Corporate Finance, Vol. 12 No. 3, pp. 660-691.
Bushman, R.M. and Smith, A.J. (2001), “Financial accounting information and corporate governance”,
Journal of Accounting and Economics, Vol. 32 Nos 1/3, pp. 237-333.
Busta, I. (2007), “Board effectiveness and the impact of the legal family in the European banking
industry”, FMA European Conference, Barcelona, Spain.
Cadbury, A. (1992), Report of the Committee on the Financial Aspects of Corporate Governance, Gee,
London.
Collett, T.S. (2005), “Voluntary disclosure of corporate governance practices by listed Australian
companies”, Corporate Governance: An International Review, Vol. 13 No. 2, pp. 188-196.
Culp, A. (2008), “Voluntary financial disclosure by Mexican corporations”, Accounting Review, Vol. 62
No. 3, pp. 533-541.
Donaldson, L. (1990), “The ethereal hand – organizational economics and management theory”,
Academy of Management Review, Vol. 15 No. 3, pp. 369-381.
Drobetz, W., Schillhofer, A. and Zimmermann, H. (2003), “Corporate governance and expected stock
returns: evidence from Germany”, (ECGI – Finance Working Paper No. 11/2003, available at: https://ssrn.
com/abstract=379102 or http://dx.doi.org/10.2139/ssrn.379102 (accessed 12 December 2018).

Farag, H. and Mallin, C. (2019), “Monitoring corporate boards: evidence from China”, European Journal
of Finance, Vol. 25 No. 6, pp. 524-549, doi: 10.1080/11351847X.2017x1369138 (accessed 5 April 2017).

Fuertes-Callen, Y., Cuellar-Fernández, B., and Pelayo-Velázquez, M. (2014), “Determinants of online

corporate reporting in three Latin American markets: the role of web presence development”, Online
Information Review, Vol. 38 No. 6, pp. 806-831.

Fung, B. (2014), “The demand and need for transparency and disclosure in corporate governance”,
Universal Journal of Management, Vol. 2 No. 2, pp. 72-80.
Galbreath, J. (2006), “Corporate social responsibility strategy: strategic options, global considerations”,
Corporate Governance: The International Journal of Business in Society, Vol. 6 No. 2, pp. 175-187,
available at: https://doi.org/10.1108/14720700610655178
Garcia, O.B. and Gill-de-Albornoz, B. (2007), “The effect of the board composition and its monitoring
committees on earnings management: evidence from Spain”, Corporate Governance, Vol. 15 No. 6,
pp. 1413-1428.
Ghazali, N.M. (2007), “Ownership structure and corporate social responsibility disclosure: some
Malaysian evidence”, Corporate Governance: The International Journal of Business in Society, Vol. 7
No. 3, pp. 251-266, available at: https://doi.org/10.1108/14720700710756535
Greenbury, R. (1995), The Greenbury Report, William M. Mercer, London.
Habib, A. (2008), “Corporate transparency, financial development and the allocation of Capital”, Abacus,
Vol. 44 No. 1, pp. 1-21.
Hampel, R. (1998), Final Report, Gee, London.
Hassan, M.K. (2012), “A disclosure index to measure the extent of corporate governance reporting by
UAE listed corporations”, Journal of Financial Reporting and Accounting, Vol. 10 No. 1, pp. 4-33.

Henry, D. (2008), “Corporate governance structure and the valuation of Australian firms: is there value in
ticking the boxes? ”, Journal of Business Finance & Accounting, Vol. 35, pp. 912-942.

VOL. 19 NO. 6 2019 j CORPORATE GOVERNANCE j PAGE 1355

 Hermalin, B.H. and Weisbach, M.S. (2003), Boards of Directors as an Endogenously Determined
Institution: A Survey of the Economic Literature, Economic Policy Review –Federal Reserve Bank of New
York, NY.
Higgs, M. (2005), “Influence of team composition and task complexity on team performance”, Team
Performance Management: An International Journal, Vol. 11 Nos 7/8, pp. 227-250.
Jain, T. and Jamali, D. (2016), “Looking inside the black box: the effect of corporate governance on
corporate social responsibility”, Corporate Governance: An International Review, Vol. 24 No. 3,
pp. 253-273.
Jensen, M.C. (1993), “The modern industrial revolution, exit, and the failure of internal control systems”,
Journal of Finance, Vol. 48 No. 3, pp. 831-880.

Jorge, A. and Deepa, A. (2011), “Corporate social responsibility practices in India: approach, drivers,
and barriers”, Corporate Governance: The International Journal of Business in Society, Vol. 11 No. 4,
pp. 399-414, available at: https://doi.org/10.1108/14720701111159244
Kamal, H.M. (2012), “A disclosure index to measure the extent of corporate governance reporting by UAE
listed corporations”, Journal of Financial Reporting and Accounting, Vol. 10 No. 1, pp. 4-33.
Kilduff, M., Angelmar, R. and Mehra, A. (2000), “Top management team diversity and firm performance:
examining the role of cognitions”, Organization Science, Vol. 11 No. 1, pp. 21-34.
Kilic, M., Kuzey, C. and Uyer, A. (2015), “The impact of ownership and board structure on corporate
social responsibility (CSR) reporting in the Turkish banking industry”, Corporate Governance: The
International Journal of Business in Society, Vol. 15 No. 3, pp. 357-374, available at: https://doi.org/
10.1108/CG-02-2014-0022
Kittipat, D.D. and Nopadol, Z.A. (2014), “Evaluation of credit risk management policies and practices in a
Vietnamese joint-stock commercial banks transaction office”, Business Economics and Tourism, Vol. 4
No. 2, pp. 556-566.

Longo, M., Mura, M. and Bonoli, A. (2005), “Corporate social responsibility and corporate performance:
the case of Italian SMEs”, Corporate Governance: The International Journal of Business in Society, Vol. 5
No. 4, pp. 28-42, available at: https://doi.org/10.1108/14720700510616578
Mensah, B.K.A. (2016), “Internal control information disclosure and corporate governance: evidence
from an emerging market”, Corporate Governance: The International Journal of Business in Society,
Vol. 16 No. 1, pp. 79-95, available at: https://doi.org/10.1108/CG-10-2015-0136

Merendino, A. and Melville, R. (2019), “The board of directors and firm performance: empirical evidence
from listed companies”, Corporate Governance: The International Journal of Business in Society, Vol. 19
No. 3, pp. 508-551, available at: https://doi.org/10.1108/CG-06-2018-0211
Moir, L. (2001), “What do we mean by corporate social responsibility?”, Corporate Governance: The
International Journal of Business in Society, Vol. 1 No. 2, pp. 16-22, available at: https://doi.org/10.1108/
EUM0000000005486

Njekang, D.N. and Afuge, J.A. (2017), “The impact of corporate governance on financial performance of
credit unions: the case study of CamCCUL network”, International Journal of Multidisciplinary Research
and Development, Vol. 4 No. 6, pp. 233-243.
Pathan, S. and Faff, R. (2013), “Does board structure in banks really affect their performance?”, Journal of
Banking and Finance, Vol. 37 No. 5, pp. 1573-1589.
Pfeffer, J. (1972), Administrative Science Quarterly, Vol. 17 No. 2, pp. 218-228.
Sen, A. (2011), “Corporate governance in India: clause 49 of the listing agreement”, JM International
Journal of Management Research, Vol. 1, pp. 162-172.
Shukla, H.J. (2008), “Corporate governance practices by Indian corporates”, Asia Pacific Business
Review, Vol. 4 No. 3, pp. 124-129.
Tandelilin, E., Kaaro, H., Mahadwartha, P. and Supriyatna, A. (2007), “Corporate governance, risk
management and bank performance: does type of ownership matter?”, EADN Working Paper No. 34.
Tanna, S., Pasiouras, F. and Nnadi, M. (2011), “The effect of board size and composition on the efficiency
of UK banks”, International Journal of the Economics of Business, Vol. 18 No. 3, pp. 441-462.
Tariq, Y. and Abbas, Z. (2013), “Compliance and multidimensional firm performance: evaluating the
efficacy of rule-based code of corporate governance”, Economic Modelling, Vol. 35, pp. 565-575.

PAGE 1356 j CORPORATE GOVERNANCE j VOL. 19 NO. 6 2019

Toksal, A. (2004), The Impact of Corporate Governance on Shareholder Value, University of Cologne,
Cologne.

Wilson, I. (2006), “Regulatory and institutional challenges of corporate governance in Nigeria post
banking consolidation”, Nigerian Economic Summit Group Economic Indicators, Vol. 12 No. 2, pp. 1-10.
Zaman, R., Arslan, M. and Sidiqui, M.A. (2015), “Corporate governance and firm performance: the role of
transparency and disclosure in the banking sector of Pakistan”, International Letters of Social and
Humanistic Sciences, Vol. 2 No. 2, pp. 152-166.

Further reading
Duhnfort, A.M., Lampenius, N. and Christian, K. (2008), “Theoretical foundations of corporate
governance revisited: a critical review”, Corporate Ownership & Control, Vol. 6 No. 2, pp. 1-3.

Hirtle, B. (2007), “Public disclosure, risk and performance at bank holding companies”, Federal Reserve
Bank of New York Staff Reports, No. 293.

VOL. 19 NO. 6 2019 j CORPORATE GOVERNANCE j PAGE 1357

 Appendix 1

Table AI Age of the respondents

Age (%) Cumulative (%)

20-25 9 9
26-30 12 21
31-35 7 28
36-40 12 40
41-45 22 62
46-50 30 92
Above 51 8 100

Table AII Years of professional experience of the respondents

Years of experience in the banking industry (%) Cumulative %

0-5 18 18
6-10 26 44
11-15 41 85
More than 15 15 100

Table AIII Gender of the respondents

Gender (%) Cumulative %

Male 61 61
female 39 100

Table AIV Executive and non-executive directors

(%) Cumulative %

Executive directors 36 36
Non-executive 20 56
Not on the board of directors 44 100

PAGE 1358 j CORPORATE GOVERNANCE j VOL. 19 NO. 6 2019

Appendix 2 Questionnaire

Sec!on A: General Informa!on

1) Posi!on in the financial ins!tu!on: a) Member b) Commi"ee c) Board d) Staff

2) Sex: a) Male b) Female c) Others

3) Age: a) 20 – 25 b) 26 – 31 c) 32 – 37 – d) 38 – 43 e) 44 – 50 f) 50+

Sec!on B: Corporate Governance Issues

Instruc!ons: Each ques!on has five op!ons and you are expected to mark a !ck ( ) in the

box that corresponds to the best response.

SA = Strongly Agree, A = Agree, I = Indifferent, D = Disagree, SD = Strongly Disagree

No 1. Board Role and Composi!on SA A I D SD
1. Board members receive a series of reports that
must be available before a board mee!ng is
held.
2. The board has a performance evalua!on
technique and management succession plan for
the staff.
3. Board and commi"ee members are capable of
interpre!ng all financial reports from staff.
2. Transparency and Disclosure SA A I D SD
1. Regular monthly and up -to-standard reports
are made available to members.
2. The supervisory board reports its ac!vi!es
directly to the members; no board
interference.
3. All financial reports are true and fair, no hidden
or modified accounts.
4. There is a project commi"ee that ensures all
projects fall within the objec!ves and budget of
the union.

No 3. Audi!ng and Compliance SA A I D SD

1. There is an independent audit commi"ee
(internal and external) that sits monthly.
2. The audit process meets the standards put in
place by the Ministry of Finance and the
so$ware has an audit trail.
3. There is an internal policy guiding the ac!vi!es
and repor!ng channels of the internal
controller.
4. There is a reputable external supervisory body
that presents monthly reports about the union.
5. Monthly audit reports are presented by the
internal and external auditors.

No 4. Risk Management SA A I D SD
1. The financial ins!tu!on has an up-to-date risk
management policy.
2. There is a loan recovery task force with a
detailed loan recovery schedule and procedure.
3. There is a defined cash ceiling and signatories of
bank accounts sign just one cheque leaf at a
!me.
4. All staff files have performance evalua!on,
guarantor and observa!on forms that are
updated regularly.
5. The financial ins!tu!ons have access to all
members quoted in the blacklist of all
supervisory bodies.
6. All collateral (landed property) is verified
monthly at the level of the lands office.
7. All loan files are accompanied with business
plans in the case of business loans or a detailed
project.

(continued)

VOL. 19 NO. 6 2019 j CORPORATE GOVERNANCE j PAGE 1359

 Sec!on C: Financial Performance Indicators

No 1. Profitability SA A I D SD
1. Dividends paid in the union are on the increase
(Latest dividends paid fall between 5% and 7%).
2. Service costs (loan interest, transfer and
deposit charges) are reduced thanks to high
profits.
3. All the reserve requirements (educa!on,
building, risk management) are met thanks to
the profit level.
4. The ins!tu!on is capable of recrui!ng and
paying qualified personnel.
5. The financial ins!tu!on meets all its social
obliga!ons through the profits made.
6. The profit of the financial ins!tu!on is on a
steady increase, reflected in the reduc!on in
transac!on costs.
7. The sources of funds are rela!vely cheaper
compared to the interest generated from loans.
8. Loan interest is paid on !me and the actual is
always equal to or above the expected amounts.
9. Profits are on the increase thanks to income-
genera!ng assets such as buildings.
10. All bills, payables, remunera!ons and others
are paid on !me.
No 2. Liquidity SA A I D SD
1. All members’ deposits are available on demand
and !mely.
2. There is a bank reserve account to meet
prompt credit demands and savings
withdrawals.
3. The ins!tu!on targets and meets cash
demands at peak periods without stress.
4. The ins!tu!on lends out up to only 70% of its
savings, while the rest and shares are kept as
reserves in the union’s reserve accounts.
5. There is a cash ceiling (maximum safe amount)
in all the union’s branches.
6. There is a day-to-day liquidity follow-up to
ensure that liquidity and profitability are in
equilibrium.
7. There is an investment account different from
bank current accounts in which excess liquidity
is deposited.
8. When demand for loans increases, investments
in landed property are stopped un!l there is
excess liquidity in the union.
9. The ins!tu!on ventures into external funding
(loans and term deposits) only when loan
demand is more than the 70% savings.
10. There is an investment commi"ee that puts all
excess liquidity into profitable ventures.
No 3. Loan Por#olio SA A I D SD
1. The number of delinquent loans and their
amounts in the ins!tu!on are decreasing over
!me.
2. The loan interest collec!on rate in the
ins!tu!on is at least 90% or more.
3. There is an up -to-date loan policy which has

(continued)

PAGE 1360 j CORPORATE GOVERNANCE j VOL. 19 NO. 6 2019

 considerably reduced bad debts.
4. The cost of loan recovery is far lower than the
benefits from the loan.
5. The loan delinquency rate has fallen below the
5% regula!on rate.
6. The loan recovery team has been very
successful in collec!ng delinquent loans.
7. All delinquent loans above 1 year are wri"en
off from the balance sheet.
8. All loan applica!on files have duly registered
mortgages.
9. All board, commi"ee and staff loans are always
current; no delinquency.
10. There are no fake collateral documents in the
ins!tu!on’s loan files.

SECTION D: Ranking Financial Performance Indicators

Rank the following in order of importance in your financial ins!tu!on by marking a !ck
( ) on the appropriate answer

NO. Indicators 1st 2nd 3rd

1. Profitability
2. Liquidity
3. Loan por&olio

Corresponding author
Isaiah Oino can be contacted at: [email protected]

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: [email protected]

VOL. 19 NO. 6 2019 j CORPORATE GOVERNANCE j PAGE 1361