The impact of corporate governance and political connections on the financial performance: the analysis of the financial distress of Lebanese banks. (12th May 2022)

• Record Type: Journal Article
• Authors: El-Chaarani, Hani; Lombardi, Rosa
• Is Part Of: International journal of applied decision sciences. Volume 15:Number 4(2022)
• Page Start: 510
• Page End: 538
• Publication Date: 2022-05-12
• Subjects: banks -- corporate governance -- political connection -- performance -- profitability -- liquidity -- financial risk; Decision making -- Periodicals; Management science -- Periodicals; 658.403005
• Languages: English
• ISSNs: 1755-8077

Abstract

This paper aims to investigate the impact of corporate governance on the financial performance of Lebanese banks also analysing the impact of political connections to draft the financial crisis of the Lebanese banking sector in 2020-2021. Annual financial reports and the Orbis-BankFocus database are used to collect financial and non-financial information of Lebanese banks between 2016-2019. Descriptive statistics and multiple regressions are applied to explore the impact of corporate governance mechanisms and political net on the profitability, liquidity level and risk management of Lebanese banks. Results reveal that: 1) internal and external governance mechanisms of the Lebanese banking sector are considered weak and need improvements; 2) internal corporate governance mechanisms can improve the financial performance of Lebanese banks; 3) the presence of political connections seems to lead risky lending practices. This research provides information to support investors, bankers, regulators, and top managers in the Lebanese banking sector. Lebanese banks must improve their internal corporate governance mechanisms to sustain in the current legal protection environment.