Corporate Governance in the Banking Industry of Kosovo

Abstract

The main purpose of this research is to study the impact of corporate governance on the financial performance of the banking sector in Kosovo. To analyze this impact, the Pearson correlation coefficient, multiple regression analysis related to the board size and board independence and banking sector performance in Kosovo were applied. The key corporate governance variables that have been studied in this research are: (i) size of the board of directors, (ii) the independence of the board of directors (the ratio between non-executive directors and the total number of board members). The data for this research were collected from the annual reports and audited financial statements of commercial banks in Kosovo for the 12 year period (2006-2017) and from questionnaires addressed to board members of commercial banks in Kosovo as well as other publications from relevant local institutions such as the Central Bank of Kosovo (CBK), Statistical Office of Kosovo (SOK), Tax Administration of Kosovo (TAK), etc. The results of the multiple regression analysis regarding the influence of the board of directors on the financial performance of the banking sector indicate that: the size of the board of directors and the independence of the board of directors have a positive and significant impact on the financial performance of the banking sector in Kosovo, expressed through return on assets (ROA) and return on equity (ROE). Findings of this research are in line with the findings of other researchers in this field and confirm the assertion that the management of the above variables improves and has a positive impact on the financial performance of banks in Kosovo.

Keywords: {'name': 'Financial Performance'}, {'name': 'Board of Directors'}, {'name': 'Independence'}, {'name': 'Banking'}

Authors & affiliations

Arber Hoti
Affiliation not supplied

Arben Dermaku
Affiliation not supplied

Deposited references

Supplied references, not a list of publications citing this article.

DOI: 10.2139/ssrn.2284814

Hoti, Arber H. and Nuhiu, Artor R., Early Adoption of International Financial Reporting Standards (IFRS) in the US Capital Markets (December 2, 2011). International Research Journal of Finance and Economics, No. 81, p. 98, 2011. Available at SSRN: https://ssrn.com/abstract=1977951.

Uwuigbe, O.R. (2011): "Corporate governance and financial performance of banks: a study of listed banks in Nigeria (Doctoral thesis)", Covenant University, p. 31.

DOI: 10.1111/j.1467-8683.2008.00671.x

Cadbury Committee Report (1992): The financial aspects of corporate governance, Gee and Co.Ltd., [accessed on 02.03.2017] received from: http://www.ecgi.org/codes/documents/cadbury.pdf.

DOI: 10.1002/bl.30032

McKinsey Governance Survey (2008): Post-financial-crisis governance, McKinsey & Company.

DOI: 10.1016/j.jbankfin.2011.10.020

Macey, J. & O'Hara, M.(2003) : The Corporate Governance of Banks, FRBNY Economic Policy Review, p.96.

DOI: 10.5817/FAI2012-2-4

Saidi, N. (2004): Corporate Governance in MENA Countries: Improving Transparency and Disclosure. Paper presented at The Middle East and North Africa Regional forum on Corporate Governance. pp. 26.

DOI: 10.5296/ijafr.v1i1.1127

Basel Committee on Banking Supervision (2006): Enhancing Corporate Governance for Banking Organisation. Basel, Switzerland.: Bank for International Settlement. pp. 35.

Deloitte, Neynrode Business University, “Good Governance driving Corporate Performance? Meta Analysis of academic research”, 2016, Deloitte.

DOI: 10.22495/cocv13i4c4p8

DOI: 10.5539/ibr.v9n2p74

DOI: 10.2139/ssrn.1150266

DOI: 10.1093/rfs/hhn099

DOI: 10.1016/j.jcorpfin.2008.02.001

value of the firm, Journal of Corporate Finance 14.2, pp. 92-106. DOI10.1016/j.jcorpfin.2008.02.001

RIINVEST (2009): Përmirësimi i Qeverisjes Korporative Dhe Transparencës në Banka dhe Kompani të Sigurimeve në Kosovë.

Nancy Moraa Ondieki, 2012, ‘Effect Of Internal Audit on Financial Performance of Commercial Banks In Kenya’, PhD, University of Nairobi.

Catherine Cherono Bett 2014, ‘The Relationship Between Effectiveness Of Internal Audit Function And Financial Performance Of Companies Listed In Nairobi Securities Exchange’, University of London, PhD Thesis.

DOI: 10.22495/cocv13i4c4p8

Ebrahim Mohammmed Al-Matari, ‘The Effect of the Internal Audit and Firm Performance: A proposed Research Framework’, University of Malta, 2013, pp. 34-41.

DOI: 10.1016/j.jbankfin.2008.05.008

Subhi Ahmad M Alaswad, Dr. Mile Stanišić, ‘Role of internal audit in performance of Libyan financial organizations’, 2016, International Journal of Applied Research 2016; 2(2): pp. 352-356.

Renée B. Adams & Hamid Mehran, “Corporate Performance, Board Structure, and Their Determinants in the Banking Industry”, 2011, Federal Reserve Bank of New York Staff Reports, pp. 1-2

DOI: 10.5539/ijbm.v10n9p182

DOI: 10.21113/iir.v1i2.188

DOI: 10.3846/btp.2017.017

DOI: 10.5539/ijef.v7n4p46

DOI: 10.1504/IJBAAF.2010.037155

DOI: 10.22495/cocv4i1p10

Baysinger & Butler: ‘Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition’, Journal of Law, Economics, and Organization, Vol. 1, 1985, fq. 101-124. DOI: 10.13140/RG.2.1.1391.1129.