The influence of corporate governance on commercial bank financial performance with the mediating role of disclosure of financial instruments
DOI:
https://doi.org/10.24311/jabes/2025.36.5.01Keywords:
Financial instrument;, IFRS 7, Corporate governance, Bank, Financial performanceAbstract
The paper examines the impact of corporate governance on the financial performance of banks with the mediating role of financial instrument disclosure (FID). The study utilizes a sample of 21 banks in Vietnam and employs multiple regression analysis with panel data spanning 14 years, from 2010 to 2023. Sobel-Goodman and Bootstrap tests are used to assess the mediating role of FID. The results show that the level of conformity with the requirements of International Financial Reporting Standard (IFRS 7) is about 36.8%. The study provides evidence of the mediating role of FID in the relationship between executive members, foreign ownership, and financial performance. In addition, educational attainment, executive participation, and foreign ownership contribute to increasing the financial performance of banks, which is explained by the agency theory and the resource dependence theory. The research implications suggest that Vietnam should establish accounting standards for FID as soon as possible. Banks, in turn, need to implement appropriate accounting policies for FID to further contribute to improving financial performance.
References
Abebe, A. A. (2022). The effect of IFRS on the financial ratios: Evidence from banking sector in the emerging economy. Economics & Finance, 10, 2113495 https://doi.org/10.1080/23322039.2022.2113495
Abraham, A. (2013). Foreign ownership and bank performance metrics in Saudi Arabia. International Journal of Islamic and Middle Eastern Finance and Management, 6(1), 43-50. https://doi.org/10.1108/17538391311310734
Adams, R. B., & Mehran, H. (2012). Bank board structure and performance: Evidence for large bank holding companies. Journal of Financial Intermediation, 21, 243-67.
Agyei-Mensah, B. K. (2017). The relationship between corporate governance mechanisms and IFRS 7 compliance: evidence from an emerging market. Corporate Governance, 17(3), 446-465. https://doi.org/10.1108/CG-06-2016-0129
Alam, S., Das, S. K., Dey, P. K., Jabed, A. S., & Hossain, S. Z. (2025). Does board expertise impact firm performance? Evidence from an emerging economy. International Journal of Disclosure and Governance. https://doi.org/10.1057/s41310-025-00289-0
Alodat, A. Y., Salleh, Z., Hashim, H. A., & Sulong, F. (2024). Investigating the mediating role of sustainability disclosure in the relationship between corporate governance and firm performance in Jordan. Management of Environmental Quality, 35(7), 1691-1720. https://doi.org/10.1108/MEQ-07-2021-0182
Alkhazaleh, A. M. K. (2017). Does banking sector performancepromote economic growth? Case study of Jordanian commercial banks. Problems and Perspectives in Management, 15(2), 55-64. doi:10.21511/ppm.15(2).2017.05
Akmal, M., & Rashid, A., & Shah, S. M., & Rehman, J. (2024). Corporate governance and performance in islamic and conventional financial institutions: moderating role of institutional quality. Audit and Accounting Review, 4(1), 54-80.
Arouri, H., Hossain, M., & Badrul, M. M. (2014). Effects of board and ownership structure on corporate performance: Evidence from GCC countries. Journal of Accounting in Emerging Economies, 4(1), 117-130. https://doi.org/10.1108/JAEE-02-2012-0007
Ball, R. (2006). International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and Business Research, 36(1), 5-27. doi: 10.1080/00014788.2006.9730040
Baron, R. M., & Kenny, D. A. (1986). The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182. https://doi.org/10.1037/0022-3514.51.6.1173
Beattie, V., McInnes, B., & Fearnley, S. (2004). A methodology for analysing and evaluating narratives in annual reports: A comprehensive descriptive profile and metrics for disclosure quality attributes. Accounting Forum, 28(3), 205-236. https://doi.org/10.1016/j.accfor.2004.07.001
Beekes, W., & Brown, P. (2006). Do better-governed Australian firms make moreinformative disclosures?. Journal of Business Finance & Accounting, 33(3/4), 422-450.
Bekele, D. T., & Degu, A. A. (2023). The effect of financial sector
development on economic growth of selected sub‐Saharan Africa
countries. International Journal of Finance & Economics, 28(3), 2834-
2842. https://doi.org/10.1002/ijfe.2566
Berthelot, S., Morris, T., & Morrill, C. (2010). Corporate governance rating and financial performance: a Canadian study. Corporate Governance, 10(5), 635-646. https://doi.org/10.1108/14720701011085599
Bischof, J. (2009). The effects of IFRS 7 adoption on bank disclosure in Europe. Accounting in Europe, 6(2), 167-194.
Boateng, R. N., Tawiah, V., & Tackie, G. (2022). Corporate governance and voluntary disclosures in annual reports: a post-International Financial Reporting Standard adoption evidence from an emerging capital market. International Journal of Accounting & Information Management, 30(2), 252-276. https://doi.org/10.1108/IJAIM-10-2021-0220
Boachie, C. (2023). Corporate governance and financial performance of banks in Ghana: the moderating role of ownership structure. International Journal of Emerging Markets, 18(3), 607-632. https://doi.org/10.1108/IJOEM-09-2020-1146
Bouteska, A. (2020). Do board characteristics affect bank performance? Evidence from the Eurozone. Journal of Asset Management, 21, 535-548 (2020). https://doi.org/10.1057/s41260-020-00181-2
Clarkson, P. M., Kao, J. L., & Richardson, G. D. (1994). The voluntary inclusion of forecasts in the MD&A section of annual reports. Contemporary Accounting Research, 11(1), 423-450.
Clarkson, P. M, Fang, X., Li, Y., & Richardson, G. (2013). The relevance of environmental disclosures: Are such disclosures incrementally informative?. Journal of Accounting and Public Policy, 32(5), 410-431.
Chan, M. C., Watson, J, & Woodliff, D. (2014). Corporate governance quality and CSR disclosures. Journal of Business Ethics, 125(1), 59-73
Chaarani, H., Abraham, R., & Skaf, Y. (2022). The impact of corporate governance on the financial performance of the Banking sector in the MENA (Middle Eastern and North African) region: An immunity test of banks for COVID-19. Journal of Risk and Financial Management, 15(2), 82. https://doi.org/10.3390/jrfm15020082
Dalziel, T., Gentry, R. J., & Bowerman, M. (2011). An integrated agency–resource dependence view of the influence of directors’ humanand relational capital on firms’ R&D spending. Journal of Management Studies, 48(6), 1217-1242. https://doi.org/10.1111/j.1467-6486.2010.01003.x
Eisenhardt, K. M. (1989). Agency theory: an assessment and review. Academy of Management Review, 14(1), 57-74.
Fatma, H. B., & Chouaibi, J. (2023). Corporate governance and firm value: A study on European financial institutions. International Journal of Productivity and Performance Management, 72(5), 1392-1418. https://doi.org/10.1108/IJPPM-05-2021-0306
Fama, E. F., & Jensen, M. C.(1983). Separation of ownership and control. The Journal of Law & Economics, 26(2), 301-325.
Gafoor, C. A., Mariappan, V., & Thyagarajan, S. (2018). Board characteristics and bank performance in India. IIMB Management Review, 30(2), 160-167.
Grossman, S. J., & Hart, O. D. (1980). Takeover bids, the free-rider problem, and the theory of the corporation. The Bell Journal of Economics, 11(1), 42-64 http://www.jstor.org/stable/3003400
Gu, V. C., Cao, R. Q., & Wang, J. (2019). Foreign ownership and performance: mediating and moderating effects. Review of International Business and Strategy, 29(2), 86-102. https://doi.org/10.1108/RIBS-08-2018-0068.
Gupta, N., & Mahakud, J. (2020). CEO characteristics and bank performance: evidence from India. Managerial Auditing Journal, 35(8), 1057-1093.
Haniffa, R. M., & Cooke, T. E. (2002). Culture, corporate governance and disclosure in Malaysian corporations. Abacus, 38(3), 317-349. doi:10.1111/1467-6281.00112
Hajer, C., & Anis, J. (2018). Analysis of the impact of governance on bank performance: Case of Commercial Tunisian Banks. Journal of the Knowledge Economy, 9(3), 871-895. Doi: 10.1007/s13132-016-0376-6
Haris, M., Yao, H., Tariq, G., Javaid, H. M., & Ain, Q. U. (2019). Corporate governance, political connections, and bank performance. International Journal of Financial Studies, 7(4), 1-37. https://doi.org/10.3390/ijfs7040062
Hasan, I., & Marton, K. (2003). Development and efficiency of the banking sector in atransitional economy. Journal of Banking and Finance, 27(12), 2249-2271.
Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1-3), 405-440. doi:10.1016/s0165-4101(01)00018-0
Hingorani, A., Lehn, K., & Makhija, A.K. (1997). Investor behavior in mass privatization: the case ofthe Czech voucher scheme. Journal of Financial Economics, 44(3), 349-396.
Holmstrom, B. (1979). Moral hazard and observability. Bell Journal of Economics, 10(1), 74-91.
Hussainey, K., & Aljifri, K. (2012). Corporate governance mechanisms and capital structure in UAE. Journal of Applied Accounting Research, 13(2), 145-160. https://doi.org/10.1108/09675421211254849.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
Gavin, J., & Kiel, C. (2003). Board composition and corporate performance: How the Australian experience informs contrasting theories of corporate governance. Corporate Governance: An International Review, 11(3), 189-205.
Issa, A., Sahyouni, A., & Mateev, M. (2024). A path to success: educational board diversity and its influence on MENA banks’ efficiency and stability. Corporate Governance, 24(6), 1283-1313. https://doi.org/10.1108/CG-08-2023-0339
Latham, C. K., & Jacobs, F. A. (2000). Monitoring and incentive factors influencing misleading disclosures. Journal of Managerial Issues, 12(2), 169-187.
Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 35(2), 688-726. https://www.jstor.org/stable/2729790
Leuz, C., & Verrecchia, R. E. (2000). The economic consequences of increased disclosure. Journal of Accounting Research, 38, 91. doi:10.2307/2672910.
Liang, Q., Xu, P., & Jiraporn, P. (2013). Board characteristics and Chinese bank performance. Journal of Banking & Finance, 37, 2953-2968.
Ma, C., Awan, R. U., Ren, D., Alharthi, M., Haider, J., & Kouser, R. (2022). The IFRS adoption, accounting quality, and banking performance: An evaluation of susceptibilities and financial stability in developing economies. PLoS ONE, 17(7), e0265688. https://doi.org/10.1371/journal. pone.0265688
Madhani, P. M. (2017). Diverse roles of corporate board: Review of various corporate governance theories. IUPJournal of Corporate Governance, 16(2), 7-28. https://ssrn.com/abstract=2981605
Mnif, Y., & Znazen, O. (2020). Corporate governance and compliance with IFRS 7. Managerial Auditing Journal, 35(3), 448-474. doi:10.1108/maj-08-2018-1969
Molla, M. I., Islam, M. S., & Rahaman, M. K. B. (2023). Corporate governance structure and bank performance: Evidence from anemerging economy. Journal of Economic and Administrative Sciences, 39(3), 730-746. https://doi.org/10.1108/JEAS-05-2021-0083
Morris, R. D. (1987). Signalling, agency theory and accounting policy choice. Accounting and Business Research, 18(69), 47-56.
Nawaz, T., & Ohlrogge, O. (2023). Clarifying the impact of corporategovernance and intellectual capital on financial performance: Alongitudinal study of Deutsche Bank (1957–2019). International Journal of Finance & Economics, 28(4), 3808-3823. https://doi.org/10.1002/ijfe.2620.
Nguyễn Thị Thu Hiền. (2023). Các yếu tố xác định mức độ công bố thông tin công cụ tài chính của ngân hàng thương mại tại Việt Nam. Tạp chí Nghiên cứu Kinh tế và Kinh doanh Châu Á, 34(11), 54-70
Othmani, H. (2022). Foreign institutional ownership and bank performance: Evidence from Tunisia. African Development Review, 34(1), 42-53.
Orazalin, N., & Baydauletov, M. (2020). Corporate social responsibility strategyand corporate environmental and social performance: the moderat‑ing role of board gender diversity. Corp Soc Responsib Environ Management, 27(4), 1664-1676
Paniaguaa, J., Rivellesb, R., & Sapena, J. (2018). Corporate governance and financial performance: The role of ownership and board structure. Journal of Business Research, 89, 229-234.
Pham, H. N. (2023). CEO characteristics and bank performance:
Case of Vietnamese commercial banks. Cogent Economics & Finance, 11(1), 2162687, DOI:
10.1080/23322039.2022.2162687
Pham, T. K., Chan, P. N., & Vo, H. D. (2023). The impact of intellectual capital and corporate governance on bank performance in Vietnam. Journal of Finance – Marketing, 14(6), 12-25. https://doi.org/10.52932/jfm.vi6
Preacher, K. J., & Hayes, A. F. (2004). SPSS and SAS procedures for estimating indirect effects in simple mediation models. Behavior Research Methods, Instruments, & Computers, 36(4), 717-731.
Probohudono, A. N., Sugiharto, B., & Arifah, S. (2019). The Influence of corporate governance, audit quality, and ownership, on financial instrument disclosure in Indonesia. Journal of Contemporary Accounting, 1(3), 173-187.
Saha, R. (2024). Corporate governance, voluntary disclosure and firm valuation relationship: evidence from top listed Indian firms. Journal of Accounting in Emerging Economies, 14(1), 187-219. https://doi.org/10.1108/JAEE-09-2021-0288
Sakawa, H., & Watanabel, N. (2020). Institutional ownership and firm performance under stakeholder-oriented corporate governance. Sustainability, 12(3), 1021. doi:10.3390/su12031021
Shleifer, A., & Vishny, R.W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737-783. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x
Ujunwa, A. (2012). Board characteristics and the financial, performance of Nigerian quoted firms. Corporate Governance, 12(5), 656-674.
Temba, G. I., Kasoga, P. S., & Keregero, C. M. (2023). Corporate governance and financial performance: Evidence from commercial banks in Tanzania. Cogent Economics & Finance, 11(2), 2247162. doi: 10.1080/23322039.2023.2247162
Worokinasih, S., & Zaini, M. L. Z. M. (2021). The mediating role of corporate social responsibility (CSR) disclosure on good corporate governance (GCG) and firm value. A technical note. Australasian Accounting, Business and Finance Journal, 14(1), 88-96. doi:10.14453/aabfj.v14i1.9.
Yamani, A., & Hussainey, K. (2020). Compliance with IFRS 7 by financial institutions: evidence from GCC. International Journal of Disclosure and Governance, 18, 42-57. https://doi.org/10.1057/s41310-020-00089-8
Yamani, A., Hussainey, K., & Albitar, K. (2021). The impact of financial instruments disclosures on the cost of equity capital. International Journal of Accounting & Information Management, 29(4), 528-551. doi:10.1108/IJAIM-02-2021-0052
Yamani, A., Hussainey, K., & Albitar, K. (2021). Does governance affect compliance with IFRS 7. Journal of Risk and Financial Management, 14(6), 239.
Zagorchev, A., & Gao, L. (2015). Corporate governance and performance of financial institutions. Journal of Economics and Business, 82, 17-41. doi:10.1016/j.jeconbus.2015.04.0
Downloads
Published
Issue
Section
License
Copyright (c) 2025 JOURNAL OF ASIAN BUSINESS AND ECONOMIC STUDIES
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
