A new study from Amir Arjomandi, Lecturer, School of Accounting, Economics and Finance, University of Wollongong, Juergen Seufert, Assistant Professor in Accounting, University of Nottingham, and Ruhul Salim, Associate professor, Curtin University shows that “Sound corporate governance not only boosts banks’ efficiency, it is also good for the profit of Australian banks and their shareholders.”
However, new research shows that factors such as the number of board meetings, the involvement of large shareholders in boardroom decisions and whether or not the board has independent members don’t play a significant role in achieving those goals.
Our study, published in the Journal of International Financial Markets, Institutions and Money, investigated the effectiveness of certain corporate governance measures on the performance of 11 Australian banks from 1999 to 2013.
It showed Australian banks improved efficiency after the introduction in 2003 of the Australian Securities Exchange (ASX) Principles of Good Corporate Governance, which aimed for improved governance mechanisms and thus better control over bank management.The principles meant all ASX-listed firms should have certain board attributes. It is recommended, for example, that a board’s chairman should not be part of the executive team, that boards should consider size and composition (such as gender equality) to meet the reasonable expectations of most investors in most situations, and that different committees for detailed oversight be established.