Impacts of ownership structure on the financial performance of conventional and Islamic banks in the agency theory context

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Abstract

According to the literature review, the analysis results of the impact of ownership structure quality on financial performance within conventional and Islamic financial institutions are contradictory. In our study, we performed a fine differential analysis aimed at resolving this ambiguity. The financial performance and ownership structure variables of conventional and Islamic banks were collected from 16 countries located in three continents: Europe, Asia, and Africa. Two samples were collected that each of them is composed of 63 banks. By using the OLS method, these panel data were compared to the impact of ownership structure on the financial performance between both types of banks in the agency theory framework during the period 2010-2018, giving us 567 bank-year observations in each sub-sample. Results revealed that the ownership structure of conventional banks has had an explained ambiguous impact on its financial performance, whereas that of Islamic banks has a positive effect. Overall, the impacts of the Chief Executive Officer (CEO) shareholding and the board’s chairman shareholding are more significant on the financial performance of conventional banks than those of impacts related to Islamic banks.

Keywords: Conventional Banks (CBs), Islamic Banks (IBs), Ownership Structure (OS), Financial Performance (FP), Corporate Governance, Comparative Study, Agency Theory

Authors’ individual contribution: Conceptualization – A.H.; Methodology – A.H. and A.B.; Investigation – A.H. and A.B.; Formal Analysis – A.H.; Visualization – A.E.A.; Supervision – A.E.A.; Writing – Review & Editing – A.H. and A.E.A. Project Administration – A.H. and A.E.A.

Declaration of conflicting interests: The Author(s) declare(s) that there is no conflict of interest.

Acknowledgements: We are grateful to two anonymous referees for useful comments on an earlier version of this paper.

JEL Classification: F33, G20, G21, G24, G30

Received: 07.12.2019
Accepted: 10.03.2020
Published online: 20.03.2020

How to cite this paper: Haddad, A., El Ammari, A., & Bouri, A. (2020). Impacts of ownership structure on the financial performance of conventional and Islamic banks in the agency theory context. Corporate Ownership & Control, 17(3), 46-70. https://doi.org/10.22495/cocv17i3art4