A study of the relationship between corporate governance board characteristics and practices, and business performance of Zimbabwe Stock Exchange listed banks

Abstract

The overriding aim of this study was to study the relationship between corporate governance board characteristics and practices, and business performance of banks listed on the Zimbabwe Stock Exchange (ZSE) at the end of 2013. Board characteristics investigated in this study were Board composition and diversity; Board size, meetings frequency and board members’ attendance at meetings; Chief Executive Officer (CEO) status and succession planning; and Board committees, with a particular emphasis on Audit, Remuneration and Nomination committees. Both financial and non-financial business performance measures were considered. The study sample was selected using a stratified random sampling approach. Further in pursuit of the study a quantitative research methodology was employed, utilizing both descriptive and inferential statistics in analyzing the data. For inferential statistics, correlation and regression analysis models were used. In addition, independent t-tests and analysis of variance (ANOVA) models were also performed on the data. The study found a significant negative relationship between all the board characteristics and practices under study and business performance. The study also found a good level of compliance with corporate governance good board practices by ZSE listed banks. Finally the study found that the identified corporate governance board characteristics and practices cannot be used as a good predictor of business performance of the ZSE listed banks. The study recommended less board diversity and fewer non-executive directors on boards. Also smaller boards were recommended together with fewer board meetings. On CEO status and succession planning it was recommended that both positions be occupied by the same person. Finally on board committees, it was recommended that ZSE listed banks have as much as possible less of such boards for enhanced business performance.