The IUP Journal of Corporate Governance
Do CEO Characteristics Moderate the Relationship Between Diversification and Banks' Financial Soundness in Emerging Markets?: A GMM Analysis
Article Details
| Pub. Date | : Oct, 2023 |
|---|---|
| Product Name | : The IUP Journal of Corporate Governance |
| Product Type | : Article |
| Product Code | : IJCG011023 |
| Author Name | : Karim Mansour, Emad Sayed and Samar Adel |
| Availability | : YES |
| Subject/Domain | : Management |
| Download Format | : PDF Format |
| No. of Pages | : 37 |
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Abstract
This study examines the impact of Bank Diversification (Div) on Financial Soundness (BFS) and also investigates the moderating effect of CEO characteristics on this relationship in Egypt. The data was collected from annual reports of a sample of Egyptian banks from 2014 to 2021. The study uses Generalized Method of Moment (GMM) for testing the research hypotheses. The results of the study show a positive effect of Div on BFS. Also, the results reveal that CEO gender, nationality, and tenure strengthen the positive effect of Div on BFS, while CEO duality weakens this positive effect. The present study offers new empirical evidence for the impact of Div on BFS from a cash flow perspective. Also, the study contributes to the banking governance literature by providing new empirical evidence from an emerging market like Egypt regarding the impact of CEO characteristics on the link between Div and BFS (cash flow perspective). The study will be of help to managers, investors, and depositors realize the importance of cash flow as an indicator of BFS, especially in emerging markets like Egypt. Also, the findings would help policymakers and regulators (the Central Bank of Egypt) realize the role of Div in supporting BFS, improving bank financial stability, and increasing market discipline.
Introduction
The banking sector is an important part of any economy, affecting every aspect of economic life in the country (Jha and Hui, 2012; and Chockalingam et al., 2018). Banks play a vital role in continuously meeting customer demands from depositors to lenders and are considered a key tool in stabilizing the financial market and managing the economy (Ongore and Kusa, 2013). Growing attention is being paid to structural, institutional, and macroeconomic aspects of financial system stability in both domestic and global fora (Sundararajan et al., 2002). The Financial Soundness (FS) of financial institutions is a crucial component of infrastructure for strong macroeconomic performance and successful monetary policy at the national level.
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