Author(s): Wadesango N., Mhaka C., Mugona Blessing
This theoretical study sought to investigate the effect of corporate governance on the financial performance of commercial banks in a turbulent economic and political environment. A lot of studies in corporate governance and firm performance have focused mainly on the manufacturing and other sectors with the exclusion of the financial. The current study focuses on this neglected sector in the assessment of the effect of corporate governance on performance of commercial banks in a turbulent economic and political environment. The results from the investigation indicate that the rights of shareholders, transparency and disclosure and board operation enhance performance and eventually improve shareholders’ value. The results of the research give a strong support to the idea that good governance framework is crucial in the financial sector as it positively influences firm performance. The desktop study also reveals that during times of high political volatility, the board of directors could try to make profit maximization the main goal in order to drive the bank towards making profits as the chances of making losses will be very high. This comes from the fact that the board is expected to manage all the bank’s forms of risks, through both the risk management committee and the audit committee. The study scrutinized the effect of corporate governance on the performance of commercial banks. It is evident that corporate governance performs a major function in the overall growth and success of banks. The findings of this study advocate and support good corporate governance practices in commercial banks as a tool of curbing bank collapsing.