CORPORATE GOVERNANCE EFFECTIVENESS, OPERATIONAL RISK AND FINANCIAL PERFORMANCE OF BANKS: THE ROLE OF FIRM SIZE
CORPORATE GOVERNANCE EFFECTIVENESS, OPERATIONAL RISK AND FINANCIAL PERFORMANCE OF BANKS: THE ROLE OF FIRM SIZE

Summary/Abstract: This study examines the effect of corporate governance and firm size on operational risk and financial performance in commercial banks in Ghana. It focuses on how board characteristics such as board size, independence, meeting frequency, and financial expertise affect the operational risk and financial outcomes of these banks. Additionally, the study examines how firm size moderates the relationship between corporate governance practices and both operational risk and financial performance. The research uses panel data collected from 15 commercial banks over 10 years (2013–2022). A two-stage least squares (2SLS) regression model was employed to test the hypotheses. The results of the direct relationships showed that board size, board meetings and firm size had a significant effect on operational risk even though that of board size and firm size were negative. Board meetings and board independence significantly influence bank performance (ROA & ROE) even though board meetings had a negative association with ROA and ROE. With respect to the interactions, the moderating effect of firm size on board meetings had a significant negative effect on operational risk. Furthermore, the moderating effect of firm size on the relationship between board size and ROA & ROE is positive and statistically significant whiles that of the interaction of firm size and board meetings is negative and statistically significant. The study contributes to the understanding of corporate governance practices in emerging markets, particularly in Ghana’s banking sector, highlighting the importance of board composition and firm size in managing operational risk and improving financial outcomes.

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