Does corporate governance quality improve credit ratings of financial institutions? Evidence from ownership and board structure

IF 5.5 Q1 BUSINESS

Corporate Governance-The International Journal of Business in Society Pub Date : 2023-01-05 DOI:10.1108/cg-05-2022-0232

Mehdi Mili, Y. Alaali

{"title":"Does corporate governance quality improve credit ratings of financial institutions? Evidence from ownership and board structure","authors":"Mehdi Mili, Y. Alaali","doi":"10.1108/cg-05-2022-0232","DOIUrl":null,"url":null,"abstract":"\nPurpose\nThe purpose of this paper is to examine to which extent ownership and board structure improve financial institutions’ credit ratings.\n\n\nDesign/methodology/approach\nOrdered Probit regression models were used to examine the association between corporate governance attributes and banks’ credit ratings. The sample consists of 97 publicly traded financial institutions on Gulf Cooperation Council (GCC) stock exchange markets and cover the period 2010–2019. All GCC countries were considered in this study which are United Arab Emirates, Saudi Arabia, Bahrain, Oman, Kuwait and Qatar.\n\n\nFindings\nThe results show that banks’ credit ratings are positively associated with the size of the board of directors and with the number of female directors serving in the board of directors. And it is negatively associated with the frequency of board meetings. Furthermore, this study finds evidence that nonbank financial institutions’ credit ratings are positively associated with CEO duality and with frequency of board meetings. Also, this study shows that their credit ratings are negatively associated with the ownership percentage held by the major five shareholders and with the number of board members serving in the board of directors.\n\n\nOriginality/value\nUnlike previous research, this study focuses on the effect of the role of two different corporate governance dimensions, namely, ownership and board structure on the rating of financial institutions. This paper contributes to the extant literature in various ways. It bridges the gap of this topic in the GCC region. And, unlike previous research, this study focused on the financial sector and divided the sample into banks and other financial institutions to examine both subsamples separately. Also, this study introduced new ownership and board structure variables for the purpose of investigating the impact of corporate governance on financial institutions’ credit ratings such as the presence of women in the board of directors.\n","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":5.5000,"publicationDate":"2023-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Corporate Governance-The International Journal of Business in Society","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/cg-05-2022-0232","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS","Score":null,"Total":0}

引用次数: 0

Abstract

Purpose The purpose of this paper is to examine to which extent ownership and board structure improve financial institutions’ credit ratings. Design/methodology/approach Ordered Probit regression models were used to examine the association between corporate governance attributes and banks’ credit ratings. The sample consists of 97 publicly traded financial institutions on Gulf Cooperation Council (GCC) stock exchange markets and cover the period 2010–2019. All GCC countries were considered in this study which are United Arab Emirates, Saudi Arabia, Bahrain, Oman, Kuwait and Qatar. Findings The results show that banks’ credit ratings are positively associated with the size of the board of directors and with the number of female directors serving in the board of directors. And it is negatively associated with the frequency of board meetings. Furthermore, this study finds evidence that nonbank financial institutions’ credit ratings are positively associated with CEO duality and with frequency of board meetings. Also, this study shows that their credit ratings are negatively associated with the ownership percentage held by the major five shareholders and with the number of board members serving in the board of directors. Originality/value Unlike previous research, this study focuses on the effect of the role of two different corporate governance dimensions, namely, ownership and board structure on the rating of financial institutions. This paper contributes to the extant literature in various ways. It bridges the gap of this topic in the GCC region. And, unlike previous research, this study focused on the financial sector and divided the sample into banks and other financial institutions to examine both subsamples separately. Also, this study introduced new ownership and board structure variables for the purpose of investigating the impact of corporate governance on financial institutions’ credit ratings such as the presence of women in the board of directors.

查看原文本刊更多论文

公司治理质量是否提高了金融机构的信用评级?来自所有权和董事会结构的证据

本文的目的是检验股权和董事会结构在多大程度上提高了金融机构的信用评级。设计/方法/方法使用有序Probit回归模型来检验公司治理属性与银行信用评级之间的关联。样本包括海湾合作委员会(GCC)证券交易所市场上的97家上市金融机构，涵盖2010-2019年期间。本研究考虑了所有海湾合作委员会国家，包括阿拉伯联合酋长国、沙特阿拉伯、巴林、阿曼、科威特和卡塔尔。研究结果表明，银行的信用评级与董事会规模和女性董事人数呈正相关。它与董事会会议的频率呈负相关。此外，本研究发现证据表明，非银行金融机构的信用评级与CEO二元性和董事会会议频率呈正相关。此外，本研究还表明，中小企业的信用等级与五大股东持股比例和董事会成员人数呈负相关。独创性/价值与以往的研究不同，本研究侧重于两个不同的公司治理维度，即所有权和董事会结构对金融机构评级的影响。本文对现存文献的贡献是多方面的。它弥补了海湾合作委员会地区在这一主题方面的差距。而且，与以往的研究不同，本研究侧重于金融部门，并将样本分为银行和其他金融机构，分别检查两个子样本。此外，本研究引入了新的所有权和董事会结构变量，目的是调查公司治理对金融机构信用评级的影响，如董事会中女性的存在。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Corporate Governance-The International Journal of Business in Society BUSINESS-

CiteScore

11.20

自引率

33.90%

发文量

期刊介绍： Providing a consistent source of in-depth information, analysis and advice considering corporate governance on an international scale, Corporate Governance: The International Journal of Business in Society focuses on knowledge development, practice and performance standards for scholars and Boards of Directors/ Governors of companies throughout the world. The journal publishes a diverse range of substantive theoretical and methodological debates as well as practical developments in the field of corporate governance worldwide. The journal particularly encourages attention to the impact of changes of business/corporate governance forms and practices on people, and the sustainability of different governance models. Articles that highlight models and structures that advance the interests, dignity and well being of all stakeholders, in a sustainable manner, are particularly welcome. The journal covers a broad spectrum of governance-related themes including: -Effective boardroom performance -Control and regulation -Executive leadership -The role and contribution of external (non-executive) directors -The growing importance of governance in the wake of ever-greater corporate scandals -Redefinitions and reassessments of corporate governance models -The role of business in society -The changing nature of the relationship and responsibilities of the firm towards various stakeholders -The incentives required to encourage more socially- and environmentally-responsible corporate action -The role and impact of local and international regulatory agencies and regimes on corporate behaviour.