The Impact of Board of Directors’ Characteristics on the Financial Performance of the Banking Sector in Gulf Cooperation Council (GCC) Countries: The Moderating Role of Bank Size

Abstract

This study investigates the impact of corporate governance characteristics on bank financial performance in Gulf Cooperation Council countries. The board characteristics include board size, board independence, board gender diversity, and CEO duality (CEO is also Board Chair), with bank size as the moderating variable. Sixty-six commercial banks from six Gulf Cooperation Council countries—Saudi Arabia, United Arab Emirates, Kuwait, Bahrain, Oman, and Qatar—are examined from 2019 to 2023 using two-stage least squares and generalized method of moments econometric methods. Board size, board independence, and board gender diversity significantly increase return on assets and return on equity. The impact of CEO duality is mixed. The empirical findings show that CEO duality increases return on equity, with a non-significant impact on return on assets. Finally, results show that bank size moderates the impacts of board size, board independence, and gender diversity in boards on the financial performance of banks. Large banks significantly increase return on assets and return on equity due to the board characteristics examined, to a greater extent than small banks. Bank leaders should expand board membership, and add independent directors and women, to improve financial performance.

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