The Impact of Internal Governance Mechanisms on the Financial Performance of Moroccan Banks

Abstract

This study analyzes the impact of internal governance practices specifically board of directors characteristics and ownership structure on the financial performance of Moroccan banks, as measured by return on assets (ROA). The empirical analysis is based on panel data for six banks covering the period 2012–2024. The methodology employed relies on ordinary least squares (OLS) regression, with robust standard errors clustered at the bank level, to ensure the validity of statistical inferences. The empirical results, derived from a hypothetical-deductive approach, indicate that several internal governance mechanisms do not have a significant impact on return on assets. However, the dual role of the CEO shows a positive and statistically significant correlation with return on assets (ROA), while majority ownership has a negative and statistically significant impact on the return on assets (ROA) of listed Moroccan banks. The study also highlights that control variables, particularly the bank’s age and level of capitalization, have a positive and statistically significant influence on financial performance, suggesting that older and better-capitalized banks perform better. These findings underscore the importance of enhancing the actual effectiveness of governance practices and pave the way for future research incorporating other mechanisms and contextual variables.

Classification JEL : C23, G21, G32, O16

Paper type: Empirical Research