The Impact of Corporate Governance on the Banking Liquidity

HRMARS - This study examines the impact of corporate governance on the financial performance of banks in the Gulf Cooperation Council (GCC) countries from 2014 to 2021, focusing on board independence, board size, board diversity, and board meeting frequency. Utilizing Partial Least Squares Structural Equation Modeling (PLS-SEM) and agency theory, data from 55 commercial and Islamic banks are analyzed to understand the relationship between these governance factors and bank liquidity, measured by the Loan-to-Deposit Ratio (LDR). The findings reveal that board independence and meeting frequency positively a etc. liquidity, while larger board size negatively impacts it. Board diversity shows no significant e ect. Control variables like total assets, GDP, and bank age also significantly influence liquidity. The study concludes that enhancing board independence and meeting frequency can improve liquidity management and financial performance. However, board diversity alone does not significantly impact liquidity, suggesting a need for broader diversity strategies. The study's regional focus and time frame limit its generalizability. This research provides valuable insights for policymakers and banking institutions in the GCC, contributing to the understanding of governance mechanisms and their influence on bank performance.