The impact of corporate governance on the performance of banking sector in GCC: does the political connection matter during crisis?

Abstract

Abstract This research paper aims to explore whether the corporate governance structure and political connection played an efficient role in preventing the negative impact of crisis, namely the Covid-19 crisis in GCC banks. Based on a data of 326 banks observations from 6 countries (Bahrain, Kuwait, Oman, Qatar, United Arab Emirates and Saudi Arabia), the results of t-test, fixed-effect, 2SLS and GMM models provide new insights regarding the political connection and corporate governance design in GCC banking sector. The results of this study show that banks do not change their corporate governance structure during crisis. Furthermore, the results indicate that both independent members on board of directors and political ownership concentration mitigate the negative impact of crisis and enhance the financial performance of banks in GCC. Finally, the results show that large banks that sustain their operational activities have large capacity to resist during crisis. The findings will be useful for bankers, regulators, central banks and governments within GCC. The results will guide them to review the governance structure to mitigate the negative impact of any future crisis.