Board Characteristics and Bank Stock Performance: Empirical Evidence from the MENA Region
Abstract
:1. Introduction
2. Literature Review
2.1. Theoretical Background
2.1.1. Agency Theory
2.1.2. Stakeholder Theory
2.1.3. Stewardship Theory
2.2. Previous Studies
3. Methodology
3.1. Sample of the Study
3.2. Model Development
3.2.1. Dependent Variables
Stock Price
Market-to-Book Ratio
3.2.2. Independent Variables
Board Size
CEO Duality
Board Independence
Number of Board Meetings
3.2.3. Control Variables
Profitability
Capital Adequacy
Bank Size
3.3. Model Specification
- t: The year of study
- i: The ith firm selected
- ε: The error term
4. Results and Findings
4.1. Descriptive Statistics
4.2. Correlation Analysis
4.3. Multivariate Analysis and Discussion
4.4. Robustness Test
- yi is the observed censored outcome variable for subject i.
- τL and τU are the lower and upper censoring values (τL = 0 and τU > 0 for this study).
- y* is observed for outcome values between τL and +∞ and is censored for outcome values less than or equal to τL or outcome values greater than or equal to 0.
- y*i = xiβ + εi is the structural equation for the Tobit model.
- The xs are factors observed for all cases and βs are regression coefficients.
- εi ∼ N(0, σ2).
5. Conclusions
Author Contributions
Funding
Data Availability Statement
Conflicts of Interest
Appendix A
Variable | Abbreviation | Measurement |
---|---|---|
Stock Price | SPRI | End-of-Year Closing Price per Share |
Market-to-Book Ratio | MBR | End-of-Year Market Capitalization divided by the Total Book Value of Common Equity |
CEO Duality | CEOD | CEO Duality Dummy Variable: 1 if the CEO is also the Chair of the Board and 0 otherwise. |
Board Independence | BIND | Percentage of Independent Board Members obtained from LSEG Data and Analytics Platform |
Board Size | BS | Number of Board Members obtained from LSEG Data and Analytics Platform |
Number of Board Meetings | NBM | Number of Board Meetings per year obtained from LSEG Data and Analytics Platform |
Capital Adequacy | CAP | End-of-Year Total Equity divided by End-of-Year Total Assets |
Profitability | ROA | Net Income divided by End-of-Year Total Assets |
Bank Size | BAS | Natural Logarithm of the Bank’s End-of-Year Total Assets |
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Research | Country/Region | Sample Size | Time Frame | Summary of Major Findings |
---|---|---|---|---|
Perdana and Adriana (2018) | Indonesia | 7 Banks | 2010–2014 |
|
Sarkar and Sarkar (2018) | India | 46 Banks | 2003–2012 |
|
Darwanto and Chariri (2019) | Indonesia | 14 Banks | 2014–2017 |
|
Uddin et al. (2021) | Bangladesh | 63 Firms | 2005–2019 |
|
Kılıç and Kuzey (2016) | Turkiye | 149 Firms | 2008–2012 |
|
Obradovich and Gill (2013) | USA | 333 Firms | 2009–2011 |
|
Awad et al. (2023) | GCC | 354 Firms | 2010–2022 |
|
Usman and Yahaya (2023) | Nigeria | 112 Firms | 2009–2021 |
|
Salem et al. (2019) | USA and Egypt | 27 USA 84 Egypt | 2012–2017 |
|
Nguyen and Huynh (2023) | Vietnam | 52 Firms | 2006–2020 |
|
Ararat et al. (2021) | Egypt | 50 Firms | 2005–2014 |
|
Mishra et al. (2024) | India | 420 Firms | 2016–2021 |
|
Andoh et al. (2023) | Ghana | 21 Firms | 2004–2016 |
|
Country | Bank Population | Missing Data | Final Sample |
---|---|---|---|
Middle East | |||
Bahrain | 9 | 5 | 4 |
Jordan | 14 | 6 | 8 |
Kuwait | 11 | 3 | 8 |
Oman | 7 | 2 | 5 |
Qatar | 9 | 3 | 6 |
Saudi Arabia | 10 | 3 | 7 |
United Arab Emirates | 18 | 7 | 11 |
North Africa | |||
Egypt | 10 | 4 | 6 |
Morocco | 7 | 3 | 4 |
Tunisia | 11 | 5 | 6 |
Total | 106 | 41 | 65 |
Variable | Abbreviation | Measurement | Reference |
---|---|---|---|
Dependent Variable | |||
Stock Price | SPRI | End-of-Year Closing Price per Share | |
Market-to-Book Ratio | MBR | End-of-Year Market Capitalization divided by the Total Book Value of Common Equity | |
Independent Variables | |||
CEO Duality | CEOD | CEO Duality Dummy Variable | |
Board Independence | BIND | Percentage of Independent Board Members obtained from LSEG Data and Analytics Platform | |
Board Size | BS | Number of Board Members obtained from LSEG Data and Analytics Platform | |
Number of Board Meetings | NBM | Number of Board Meetings per year obtained from LSEG Data and Analytics Platform | |
Bank Control Variables | |||
Capital Adequacy | CAP | End-of-Year Total Equity divided by End-of-Year Total Assets | |
Profitability | ROA | Net Income divided by End-of-Year Total Assets | |
Bank Size | BAS | Natural Logarithm of Bank’s End-of-Year Total Assets |
Variables | Mean | Std. Dev | Min | Max |
---|---|---|---|---|
Dependent Variables: Bank Stock Performance | ||||
SPRI (in USD) | 5.17 | 3.504 | 0.03 | 90.97 |
MBR | 1.29 | 1.32 | 0.11 | 20.23 |
Independent Variables: Board Characteristics | ||||
CEOD | 0.040 | 0.197 | 0 | 1 |
BIND | 0.359 | 0.286 | 0.00 | 1.00 |
BS | 9.917 | 1.673 | 5 | 16 |
NBM | 8.139 | 3.832 | 3 | 28 |
Control Variables: Bank-Specific | ||||
CAP | 0.135 | 0.036 | 0.117 | 0.199 |
ROA | 0.0851 | 0.0155 | −0.1007 | 0.2409 |
BAS | 23.912 | 1.077 | 20.303 | 26.512 |
Variables | SPRI | CEOD | BIND | BS | NBM | CAP | ROA | BAS | MBR |
---|---|---|---|---|---|---|---|---|---|
SPRI | 1.00 | ||||||||
CEOD | 0.2273 *** | 1.00 | |||||||
BIND | 0.0312 | 0.0174 | 1.00 | ||||||
BS | 0.2131 *** | 0.1386 ** | 0.0570 | 1.00 | |||||
NBM | −0.1708 *** | −0.0883 | −0.2499 | 0.0619 | 1.00 | ||||
CAP | 0.0951 ** | −0.2137 *** | 0.1861 *** | −0.0328 | −0.0831 | 1.00 | |||
ROA | 0.2189 *** | 0.1126 * | −0.0038 | 0.1916 *** | −0.1589 ** | 0.1270 *** | 1.00 | ||
BAS | 0.4607 *** | 0.3873 *** | −0.0865 | 0.2315 *** | −0.1133 | −0.160 *** | 0.3342 *** | 1.00 | |
MBR | 0.4977 *** | 0.1390 ** | 0.2091 *** | −0.0102 | 0.1720 ** | 0.3561 *** | 0.4112 *** | 0.2309 *** | 1.00 |
Collinearity Diagnostics | |||||||||
VIF | 1.29 | 1.13 | 1.14 | 1.14 | 1.11 | 1.24 | 1.53 | ||
Mean VIF | 1.23 |
Panel Regression | SPRI | MBR | ||||
---|---|---|---|---|---|---|
Variable | Pooled OLS | RE | FE | Pooled OLS | RE | FE |
CEOD | −0.0254 (0.131) | −0.0582 (0.075) | −0.0614 (0.077) | −0.0118 (0.032) | −0.06122 (0.322) | −0.0709 (0.061) |
BIND | 0.0022 ** (0.001) | 0.0018 ** (0.0007) | 0.0019 ** (0.0008) | 0.0338 ** (0.015) | 0.0477 ** (0.021) | 0.0442 ** (0.018) |
BS | 0.0249 (0.017) | −0.0177 ** (0.007) | −0.0166 ** (0.008) | −0.5589 * (0.312) | −0.7132 ** (0.347) | −0.9038 ** (0.438) |
NBM | −0.0209 *** (0.007) | −0.0056 (0.004) | −0.0050 (0.004) | −0.1160 (0.094) | −0.1519 (0.158) | −0.1405 (0.159) |
CAP | 4.4124 *** (1.183) | 0.9691 (0.700) | 1.2904 * (0.719) | 0.9024 * (0.537) | 1.0225 ** (0.489) | 0.9823 ** (0.374) |
ROA | 0.5816 (0.598) | 0.7920 *** (0.224) | 0.7935 *** (0.229) | 0.8929 *** (0.283) | 0.9801 *** (0.350) | 0.7702 *** (0.296) |
BAS | 0.3649 *** (0.032) | 0.4320 *** (0.037) | 0.4435 *** (0.045) | 0.4519 ** (0.228) | 0.2761 *** (0.027) | 0.5641 *** (1.810) |
Constant | −8.3529 *** (0.772) | −8.9824 *** (0.921) | −9.2967 *** (1.126) | 0.4427 *** (0.038) | 0.2028 *** (0.017) | 0.1476 *** (0.020) |
Firm Fixed Effects | Yes | Yes | Yes | Yes | Yes | Yes |
Year Fixed Effects | Yes | Yes | Yes | Yes | Yes | Yes |
Wald χ2/F-statistic | 34.08 *** | 152.94 *** | 16.51 *** | 29.23 *** | 112.45 *** | 34.87 *** |
R-squared | 0.4019 | 0.4408 | 0.4801 | 0.3612 | 0.4622 | 0.4971 |
Hausman Test (χ2) | 18.77 *** | 21.23 *** | ||||
White Test (χ2) | 33.00 | 21.38 | ||||
White Test p-value | 0.4180 | 0.2345 | ||||
Wooldridge Test | 24.65 | 19.02 | ||||
Wooldridge Test p-value | 0.001 | 0.006 |
Driscoll–Kraay Standard Errors | ||
---|---|---|
Variable | SPRI | MBR |
CEO | −0.0359 (0.076) | −0.1249 *** (0.035) |
IND | 0.0020 *** (0.0004) | 0.0567 * (0.028) |
BS | −0.0149 ** (0.006) | −0.0130 ** (0.005) |
NMB | −0.0038 * (0.002) | −0.0053 (0.003) |
CAP | 1.4360 *** (0.3536) | 4.8500 *** (0.585) |
ROA | 1.3350 *** (0.269) | 0.9283 ** (0.349) |
BAS | 0.4978 *** (0.043) | 0.3361 *** (0.016) |
Constant | −10.4648 *** (1.137) | −9.5709 *** (0.447) |
F-statistic | 319.11 *** | 254.35 *** |
R-squared | 0.5161 | 0.5694 |
TOBIT Regression | ||
---|---|---|
Variable | SPRI | MBR |
CEOD | −0.0257 (0.126) | −0.8761 (2.136) |
BIND | 0.0023 ** (0.001) | 0.1459 ** (0.062) |
BS | −0.0212 ** (0.008) | −0.1191 ** (0.055) |
NMB | −0.0199 *** (0.006) | −0.0017 ** (0.0008) |
CAP | 0.4276 *** (0.111) | 0.8803 ** (0.446) |
ROA | 1.0830 ** (0.456) | 1.4095 *** (0.408) |
BAS | 0.3535 *** (0.031) | 1.0226 *** (0.101) |
Constant | −7.9327 *** (0.764) | 0.5938 *** (0.048) |
LR χ2 | 169.36 *** | 98.34 *** |
Pseudo R-squared | 0.5231 | 0.4804 |
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Awad, A.B.; Gharios, R.; Abu Khalaf, B.; Seissian, L.A. Board Characteristics and Bank Stock Performance: Empirical Evidence from the MENA Region. Risks 2024, 12, 81. https://doi.org/10.3390/risks12050081
Awad AB, Gharios R, Abu Khalaf B, Seissian LA. Board Characteristics and Bank Stock Performance: Empirical Evidence from the MENA Region. Risks. 2024; 12(5):81. https://doi.org/10.3390/risks12050081
Chicago/Turabian StyleAwad, Antoine B., Robert Gharios, Bashar Abu Khalaf, and Lena A. Seissian. 2024. "Board Characteristics and Bank Stock Performance: Empirical Evidence from the MENA Region" Risks 12, no. 5: 81. https://doi.org/10.3390/risks12050081