Hab oo , Ome Saeed; Alowaime , Osama Hamad; Waked, Sami Sobhi; Alobaid,
Rayed Obaid
A icle
The mode a ing e ec o independen boa d
membe s’ owne ship on he ela ionship be ween hei
independence and i m pe o mance
Cogen Business & Managemen
P o ided in Coope a ion wi h:
Taylo & F ancis G oup
Sugges ed Ci a ion: Hab oo , Ome Saeed; Alowaime , Osama Hamad; Waked, Sami Sobhi; Alobaid,
Rayed Obaid (2024) : The mode a ing e ec o independen boa d membe s’ owne ship on he
ela ionship be ween hei independence and i m pe o mance, Cogen Business & Managemen ,
ISSN 2331-1975, Taylo & F ancis, Abingdon, Vol. 11, Iss. 1, pp. 1-29,
h ps://doi.o g/10.1080/23311975.2024.2399309
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/326548
S anda d-Nu zungsbedingungen:
Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen
Zwecken und zum P i a geb auch gespeiche und kopie we den.
Sie dü en die Dokumen e nich ü ö en liche ode komme zielle
Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich
machen, e eiben ode ande wei ig nu zen.
So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen
(insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en,
gel en abweichend on diesen Nu zungsbedingungen die in de do
genann en Lizenz gewäh en Nu zungs ech e.
Te ms o use:
Documen s in EconS o may be sa ed and copied o you pe sonal
and schola ly pu poses.
You a e no o copy documen s o public o comme cial pu poses, o
exhibi he documen s publicly, o make hem publicly a ailable on he
in e ne , o o dis ibu e o o he wise use he documen s in public.
I he documen s ha e been made a ailable unde an Open Con en
Licence (especially C ea i e Commons Licences), you may exe cise
u he usage igh s as speci ied in he indica ed licence.
h ps://c ea i ecommons.o g/licenses/by/4.0/
Cogen Business & Managemen
ISSN: 2331-1975 (Online) Jou nal homepage: www. and online.com/jou nals/oabm20
The mode a ing effec o independen boa d
membe s’ owne ship on he ela ionship be ween
hei independence and fi m pe o mance
Ome Saeed Hab oo , Osama Hamad Alowaime , Sami Sobhi Waked &
Rayed Obaid Alobaid
To ci e his a icle: Ome Saeed Hab oo , Osama Hamad Alowaime , Sami Sobhi Waked &
Rayed Obaid Alobaid (2024) The mode a ing effec o independen boa d membe s’ owne ship
on he ela ionship be ween hei independence and fi m pe o mance, Cogen Business &
Managemen , 11:1, 2399309, DOI: 10.1080/23311975.2024.2399309
To link o his a icle: h ps://doi.o g/10.1080/23311975.2024.2399309
© 2024 The Au ho (s). Published by In o ma
UK Limi ed, ading as Taylo & F ancis
G oup
View supplemen a y ma e ial
Published online: 12 Sep 2024.
Submi you a icle o his jou nal
A icle iews: 1459
View ela ed a icles
View C ossma k da a
Full Te ms & Condi ions o access and use can be ound a
h ps://www. and online.com/ac ion/jou nalIn o ma ion?jou nalCode=oabm20
Accoun ing, co po A e go e nAnce & Business e hics |
eseA ch A icle
Cogen Business & ManageMen
2024, VoL. 11, no. 1, 2399309
The mode a ing e ec o independen boa d membe s’ owne ship
on he ela ionship be ween hei independence and i m
pe o mance
ome saeed hab oo a , osama hamad Alowaime a, sami sobhi Wakedb and
ayed obaid Alobaidc
aDepa men o adminis a i e sciences, no he n Bo de uni e si y, a a , saudi a abia; bDepa men o accoun ing, no he n
Bo de uni e si y, a a , saudi a abia; cDepa men o accoun ing, uni e si y o Hail, Hail, saudi a abia
ABSTRACT
Despi e he ex ensi e esea ch on he ela ionship be ween boa d independence and
i m pe o mance, which e eals an inconclusi e esul , he e is a lack o e idence on
he po en ial ac o s a ec ing his ela ionship. his s udy is an a emp o ill his gap
by in es iga ing whe he equi y owne ship by independen boa d membe s a ec s he
associa ion be ween boa d independence and saudi bank pe o mance. o subs an ia e
i s hypo heses and sides ep endogenei y conce ns, his s udy employs a panel da ase
o saudi lis ed banks om 2009 o 2018, using di e se s a is ical echniques, including
easible gene alized leas squa es (Fgls), o dina y leas squi e (ols), andom-e ec s,
panel-co ec ed s anda d e o s (pcse), ixed-e ec s, wo-s age leas squa es (2sls),
wo-s ep sys em gene alized me hod o momen s (gMM), and hie a chical analysis. he
empi ical esul s show ha while independen boa d membe s ha e a nega i e impac
on bank pe o mance, hei owne ship has a posi i e in luence. Mo e in e es ingly, he
esul s demons a e ha he nega i e ela ionship be ween bank inancial and ma ke
pe o mance and independen boa d membe s is posi i ely and signi ican ly mode a ed
by hei owne ship. hese indings challenge he no ion ha good go e nance p ac ices
like ha ing mo e independen membe s on he boa d would lead o be e i m
pe o mance and indica e ha hei e ec i eness is con ingen on hei owne ship
le el. insigh s de i ed om agency heo y and he con e gence o in e es s hypo hesis
con ibu e aluable pe spec i es o his in es iga ion and sugges ha boa d
independence would be e icien when he con e gence o in e es s be ween
independen boa d membe s and o he sha eholde s is engaged.
1. In oduc ion
e ec i e co po a e go e nance (cg) p ac ices educe agency con lic s and maximize sha eholde weal h.
ecen schola ly in es iga ions ha e been di ec ed owa d dissec ing he in ica e in e connec ions
be ween cg mechanisms and i m pe o mance (Fp). he c ux o his deba e e ol es a ound he c ucial
unc ion o he boa d o di ec o s as he p incipal egula o asked wi h o e seeing and di ec ing man-
agemen o he bene i o sha eholde s (Jensen & Meckling, 1976). Among boa d a ibu es, boa d inde-
pendence (Bi) assumes a cen al posi ion in shaping boa d composi ion and is conside ed a c ucial
ya ds ick o assessing i s e icacy. undoub edly, he signi icance o independen di ec o s in de e mining
boa d e ec i eness canno be o e looked (chen & Al-najja , 2012).
cg- ela ed heo ies o e di e en iewpoin s on how Bi in luences a company’s success. Agency,
esou ce dependency, and legi imacy heo ies a e signi ican in his espec . hey asse ha he ole o
© 2024 he au ho (s). Published by in o ma uK Limi ed, ading as aylo & F ancis g oup
CONTACT ome saeed Hab oo ome [email p o ec ed], [email p o ec ed]om Depa men o adminis a i e sciences,
no he n Bo de uni e si y, a a , saudi a abia
his a icle has been co ec ed wi h mino changes. hese changes do no impac he academic con en o he a icle.
h ps://doi.o g/10.1080/23311975.2024.2399309
his is an open access a icle dis ibu ed unde he e ms o he C ea i e Commons a ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. he e ms on which his a icle has been
published allow he pos ing o he accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
ARTICLE HISTORY
ecei ed 26 Feb ua y
2024
e ised 12 Augus 2024
Accep ed 27 Augus 2024
KEYWORDS
independen boa d
membe s’ owne ship;
bank pe o mance;
mode a ing e ec ; saudi
A abia; panel da a;
ins umen al a iables;
gMM
SUBJECTS
co po a e go e nance;
Banking; co po a e
Finance; Financial
Accoun ing
2 o. s. hAB oo e Al.
independen membe s is o o e see managemen , se e as links be ween he o ganiza ion and i s s ake-
holde s, acili a e access o esou ces, and ul ima ely legi imize he o ganiza ion (Fama & Jensen, 1983;
hamdan, 2018; hillman & Dalziel, 2003; Jensen & Meckling, 1976). howe e , ins i u ional and s ewa dship
amewo ks also p o ide an al e na i e pe spec i e ha wa ns agains an en i ely posi i e ela ionship
(Da is e al., 1997; gau e al., 2015; Waheed & Malik, 2019). hese heo ies, on he o he hand, highligh
some limi a ions whe e independen di ec o s, being non-execu i es, may no be well e sed wi h o ga-
niza ional s a egies, s eng hs, o weaknesses, ende ing hem less capable o p o iding s a egic ad ice
o making app op ia e manage ial judgmen s.
explo ing he in ica e in e play be ween Bi and Fp has yielded inconclusi e esul s. Fo example,
Al-gam h e al. (2020), e ena e al. (2022), and shi u & che-Ahmad (2023) demons a ed posi i e co -
ela ions. con e sely, Amin & no (2019), Anas e al. (2023), shan (2019), Waheed & Malik (2019), and
o he s ha e epo ed nega i e co ela ions. howe e , Assenga e al. (2018), peizhi & amzan (2020), and
oudaki (2018), among o he s, ound ha Bi has no signi ican explana o y powe on Fp. hese empi ical
s udies highligh he complexi y o unde s anding how Bi a ec s Fp.
unde s anding how Bi and Fp a e ela ed in saudi A abia and in he la ge A abic egion is an in i-
ca e web o inconclusi e e idence. Al nasse (2020) and hamdan e al. (2019) belie e in a cons uc i e
e ec , which sugges s ha pe o mance is highe in i ms wi h mo e independen boa ds. howe e ,
ghabayen (2012) and hab oo (2022) seem o hold con a y iews ha he e is an in e se e ec , indica -
ing ha mo e ou side s on he boa d leads o lowe Fp. howe e , Buallay e al. (2017) ailed o es ablish
solid e idence on he link be ween Bi and Fp.
Because o he absence o consis en esul s, some s udies ha e es ablished a gumen s suppo ed by
di e en heo e ical amewo ks o empi ically examine he ac o s ha could mode a e he ole o boa d
composi ion on Fp (e.g. Fayyaz e al., 2023; hab oo , 2020; nime e al., 2023; an, 2021; u ibe-Boho quez
e al., 2018; Waheed & Malik, 2019; Xu e al., 2023). heo e ical pe spec i es and empi ical e idence indica e
one signi ican ac : owne ship s uc u e subs an ially a ec s bo h boa d composi ion and Fp (hab oo ,
2020; Waheed & Malik, 2019, among o he s). he sepa a ion o owne ship om con ol c ea es a con lic o
in e es s be ween owne s and manage s, leading o he po en ial exp op ia ion o owne s’ igh s by man-
age s (gau e al., 2015; shlei e & ishny, 1997). Agency heo y is a signi ican concep in cg esea ch,
sugges ing ha di ec o s and manage s may ac oppo unis ically unless hey ha e he p ope incen i es
in place o align hei in e es s wi h hose o sha eholde s (Jensen & Meckling, 1976; Wang e al., 2019).
g ounded in he con e gence o in e es s hypo hesis, manage ial owne ship se es as a powe ul incen i e
mechanism o di ec o s and manage s o ac in he bes in e es s o sha eholde s, as hei own weal h is
ied o he Fp (B ickley & Zimme man, 2010; Jensen & Meckling, 1976).
on he o he hand, he en enchmen hypo hesis sugges s ha an excessi e inc ease in owne ship
will encou age con olling sha eholde s and manage s o en ench hemsel es in hei posi ions and ac
in hei own bes in e es s a he expense o o he sha eholde s’ igh s, especially he mino i y sha ehold-
e s’ igh s (Ameziane las e , 2006; Kwansa e al., 2014). his hypo hesis posi s ha an inc ease in owne -
ship, no ably manage ial owne ship can lead o nega i e consequences on o he cg mechanisms (Allam,
2018; Ameziane las e , 2006). en enched manage s and con olling sha eholde s may ha e he abili y o
con ol he composi ion o he boa d and hi e boa d membe s who a e less likely o e ec i ely moni o
he manage ’s ac ions (Allam, 2018).
he con e gence o in e es s e sus he en enchmen hypo heses indica es ha di ec o owne ship
can be a double-edged swo d, wi h he po en ial o ei he align in e es s and enhance con ol and pe -
o mance o c ea e con lic s and impai sha eholde s weal h (c aswell e al., 1997; Joha i e al., 2008;
Mcconnell & se aes, 1990; Mo ck e al., 1988; shan, 2019).
co po a e owne ship in saudi A abia is highly concen a ed (Boshnak, 2021; hab oo , 2022) and is
cha ac e ized by a mix o amily and con olling sha eholde s, including ou side owne s (i.e. amily, go -
e nmen al, ins i u ional, oyal), and inside owne s (i.e. execu i e, non-execu i e di ec o s) wi h a ying
le els o in luence and con ol o e companies (Al-gam h e al., 2020; Al-ghamdi & hodes, 2015; Bajahe
e al., 2022; Boshnak, 2021; hab oo , 2020).
in an en i onmen cha ac e ized by owne ship concen a ion and con olling sha eholde s’ dominance,
such as in saudi A abia, some con en ional go e nance mechanisms employed, such as Bi, may no wo k
e ec i ely since con olling sha eholde con ol boa d composi ion and hinde independen di ec o s
cogen Business & MAnAgeMen 3
om ca ying ou hei o e sigh and supe iso y du ies (Ande son & eeb, 2004; Ba ako e al., 2006;
Boshnak, 2021).
Acco dingly, his s udy a gues ha agency con lic s, no ably ype ii be ween majo i y and mino i y
sha eholde s, may be exace ba ed by con olling en i ies— amilies o ins i u ions—owning a signi ican
po ion o bank sha es and placing hei ep esen a i es in c i ical posi ions o en ench hemsel es and
se e hei p i a e bene i s on he expense o mino i y sha eholde s. he e o e, hey may hesi a e o
g an independen di ec o s he powe o moni o and ac in he bes in e es s o all sha eholde s (shan,
2019). in such a si ua ion, he e ec i eness o Bi in o e seeing execu i es and es aining he g eedy
impulses o con olling sha eholde s may be comp omised. howe e , shan (2019), among o he s, ound
ha when he con e gence o in e es s e ec p edomina ed a a low le el o di ec o owne ship (0%–
20%), Bi would be e ec i e and a o ably connec ed o Fp.
conside ing he dominance o con olling sha eholde s and hei ep esen a i es on saudi co po a e
boa ds, i can be said ha he weak ole o independen boa d membe s can be mi iga ed o mode a ed
h ough independen di ec o s ha ing a ce ain amoun o company sha es a a low le el, so ha hey
ac as powe ul small owne s whose in e es s a e aligned wi h hose o he o he sha eholde s. hey a e
no longe jus ou side s, bu also owne s who may be mo e inclined o ake a long- e m iew o he Fp
and o push o s a egies ha will bene i all sha eholde s in he long un.
Acco ding o he alignmen o in e es s de i ed om agency heo y pe spec i e, he le el o own-
e ship by independen di ec o s would enhance hei powe o e con olling sha eholde s and man-
age s, which may no only egains hei iola ed independence as ou side s, bu also inc eases hei
in luence as owne s o moni o managemen and es ic hei oppo unis ic beha io esul ing om
he en enchmen e ec owa ds mino i y sha eholde s (Bhaga & Bol on, 2013; Jalila & De i, 2012;
shan, 2019).
i is c ucial o conduc mo e empi ical esea ch on he ole o owne ship s uc u e on cg mechanisms
and Fp in saudi A abia. his s udy explo es how independen di ec o s’ equi y holdings a ec hei
au onomy, and hus, Fp, and whe he his ype o owne ship can be used as an e ec i e go e nance
mechanism o encou age independen di ec o s o pe o m hei du ies e ec i ely. his esea ch aims o
gene a e new insigh s in o cg dynamics in i ms wi h high amily con ol and concen a ed owne ship
(Al-gam h e al., 2020). his in es iga ion will con ibu e o ou knowledge o cg p ac ices unde unique
condi ions, in which such s udies a e limi ed. his wo k esponds o he ecommenda ions o Almonee
& samon a ay (2019), Dalwai e al. (2015) hab oo (2020, 2022), and leung e al. (2014), among o he s,
o u he in es iga e he a iables ha can in luence he linea link be ween Bi and Fp in saudi A abia
and o he gul coope a ion council (gcc) na ions.
his s udy makes signi ican con ibu ions o li e a u e h ough se e al dis inc i e a enues. As shown
in s udies by Al-Fa ooque e al. (2020), Al-gam h e al. (2020), Buallay e al. (2017), and shi u &
che-Ahmad (2023), among o he s, much esea ch has been conduc ed on he di ec e ec o owne ship
s uc u e on Fp. howe e , limi ed e o s ha e been made o in es iga e he indi ec ole o di e en
ypes o boa d owne ship in shaping he link be ween he composi ion o he boa d and Fp. his s udy
is no able because i ep esen s he i s o i s kind o in es iga e how owne ship by independen boa d
membe s a ec s he balance be ween hei au onomy and saudi bank pe o mance.
in addi ion, he majo i y o ele an empi ical esea ch has been ca ied ou in indus ialized coun ies,
which makes i di icul o gene alize he esul s o de eloping economies wi h di e en ins i u ional, cul u al,
and go e nance egimes (A o a & sha ma, 2016; hani a & hudaib, 2006; n im e al., 2013b). consequen ly, a
signi ican con ibu ion is made o he li e a u e by in es iga ing hese c i ical issues wi hin a de eloping econ-
omy such as saudi A abia, which has dis inc legal, cul u al, and ins i u ional cha ac e is ics.
Fu he mo e, he s udy’s indings ha e signi ican implica ions o egula o s and ma ke pa icipan s
in na ions wi h concen a ed owne ship, such as saudi A abia. i is c ucial o unde s and independen
boa d membe s’ owne ship (Bio) as a signi ican o m o go e nance. his makes hem mo e indepen-
den and enhances he boa d quali y and e ec i eness in shielding he boa d om in e e ence by con-
olling sha eholde s. such insigh s a e c i ical o achie ing be e Fp wi hin hese unique co po a e
en i onmen s, e ealing he p ac ical ele ance o he s udy esul s.
he esea ch p oceeds as ollows: he second sec ion co e s a li e a u e e iew ela ed o hypo hesis
de elopmen . he me hodology is discussed in he hi d sec ion. he ou h sec ion dissec s he main
4 o. s. hAB oo e Al.
indings o his s udy, in addi ion o he obus ness esul s. sec ion i e concludes he pape . Finally,
sec ion six summa izes he s udy con ibu ions and implica ions.
2. Li e a u e e iew and hypo hesis de elopmen
2.1. BI and FP
op imal co po a e policies and s a egies hinge on he imp ima u o he boa d o di ec o s, making he
e ec i eness o hese boa ds pa amoun o mi iga ing agency cos s and inc easing Fp. unde agency
heo y, boa ds cha ac e ized by a p eponde ance o independen and ex e nal di ec o s a e mo e adep
a moni o ing manage ial beha io , sc u inizing execu i e decisions, and s ee ing he i m owa d
enhanced pe o mance (conheady e al., 2015; Jensen & Meckling, 1976; puche a-Ma ínez &
gallego-Ál a ez, 2020). esou ce dependence and legi imacy heo ies unde sco e he pi o al ole o inde-
penden boa d membe s as s a egic asse s. hey enhance Fp by es ablishing connec ions wi h he ex e -
nal milieu, secu ing essen ial esou ces, mi iga ing en i onmen al eliance, and con ibu ing o he
es ablishmen and ein o cemen o legi imacy (hamdan, 2018; hillman & Dalziel, 2003). con e sely, s ew-
a dship heo y posi s a di e gen pe spec i e on he in luence o Bi on Fp (gau e al., 2015; Waheed &
Malik, 2019). F om his s andpoin , independen and non-execu i e di ec o s demons a e diminished
e ec i eness in augmen ing Fp when jux aposed wi h hei in e nal and execu i e coun e pa s. issues
including in o ma ion asymme y, a lack o awa eness ega ding co po a e s eng hs and weaknesses, a
de ici in i m-speci ic expe ience, and delays in decision execu ion con ibu e o hei pe cei ed ine ec-
i eness. Fu he mo e, ins i u ional heo y in oduces he no ion ha o ganiza ions may hi e ou side
membe s on hei boa ds p ima ily o con o m o ins i u ional p essu es, encompassing egula i e, no -
ma i e, and cogni i e impe a i es. hus, ha ing mo e ex e nal di ec o s some imes leads o be e Fp
(peng, 2004; Waheed & Malik, 2019).
A de ailed e iew o p io empi ical s udies in es iga ing he link be ween Bi and Fp in de eloped and
eme ging na ions shows ha esul s o en need o be mo e conclusi e and consis en . im & chung
(2017) del e in o inside owne ship e sus Bi in he us es au an sec o . he indings e lec a complex
si ua ion whe e he posi i e in luence o Bi on e u n on asse s ( oA) is accompanied by a nega i e
e ec on obin’s q ( Q). in con as , pan e al. (2018) demons a ed ha Bi does no ha e any signi ican
in luence on Fp in he us i indus y. Koji e al. (2020) in es iga ed he ole o Bi in he pe o mance o
Japanese amily o-non- amily i ms. he ou comes demons a e ha independen boa ds ha e de imen-
al e ec s on oA. howe e , hey did no in luence he Q. oudaki’s (2018) s udy on la ge ag icul u al
co po a ions in new Zealand e ealed no no able e ec o Bi on Fp. in shan’s (2019) Aus alian explo a-
ion, Bi had an in e se impac on Fp. Me endino & Mel ille (2019) sc u iny o he boa d’s ole in
i alian-lis ed companies indica es ha independen di ec o s ha e a nonlinea impac on Fp.
puche a-Ma ínez & gallego-Ál a ez (2020), spanning 34 coun ies, asce ained he ad e se in luence o
Bi on Fp. An op imis ic pe spec i e was a icula ed by Xu e al. (2023), emphasizing he ad an ageous
impac o Bi on he inancial pe o mance o he wo ld’s o emos publicly lis ed amily en e p ises.
hence, he nexus be ween Bi and Fp p o es o be in ica e and con ex -dependen ac oss di e se global
se ings.
Fu he empi ical esea ch has been conduc ed in bo h eme ging and de eloping coun ies. Assenga
e al. (2018) in es iga ed whe he in oducing ou side di ec o s o companies lis ed in anzania can
inc ease pe o mance. howe e , hey ind no appa en in luence o ex e nal di ec o s on co po a e suc-
cess. simila ly, u e al. (2018) s udy he link be ween inancial pe o mance and boa d s uc u e in
ie nam’s lis ed companies. hey ound ha Bi had no impac on Fp. on he con a y, Fa han e al. (2020)
in es iga ed he indian pha maceu ical sec o o show ha independen di ec o s posi i ely in luence Q
bu nega i ely a ec oA. Majeed e al. (2020) in es iga ed he banking sec o s in pakis an and china.
hey ind ha non-execu i e di ec o s in he pakis ani banking indus y a e s ongly and ad e sely co -
ela ed wi h oA bu no signi ican ly co ela ed wi h e u n on equi y ( oe). none heless, in he chinese
banking indus y, non-execu i e di ec o s ha dly make a di e ence in he oe and oA.
esea ch has p oduced inconsis en esul s ega ding whe he Bi is linked o Fp in he dynamic cg
en i onmen o gcc coun ies and he A ab egion. in his s udy o egyp ian lis ed companies, el-habashy
cogen Business & MAnAgeMen 5
(2019) ound ha non-execu i e di ec o s did no in luence Fp. in con as , Al-gam h e al. (2020) analyze
he complex linkages be ween o eign owne ship, Bi, and Fp in he uni ed A ab emi a es. hey disco -
e ed ha , while Bi has a de imen al in luence on social pe o mance, inancial pe o mance is posi i ely
impac ed. in con as o Al-saidi (2021) esea ch, which ound ha Bi and Q in Kuwai ha e a posi i e
ela ionship, Alajmi & Wo hing on (2023) documen ed a nega i e co ela ion.
he nexus be ween Bi and business success in he saudi con ex has ecen ly been he ocus o aca-
demic in es iga ion; ne e heless, empi ical analysis shows in ica e disc epancies. Fo example, Al-Fa yan
(2021), Boshnak (2021), and ghabayen (2012) ound ha , Bi has a de imen al impac on saudi Fp.
ne e heless, habbash & Bajahe (2015) in es iga ion o boa d s uc u e demons a es ha he p esence
o an independen boa d a o ably in luences Fp. hamdan e al. (2019) ound ha Bi has a bene icial
e ec on Fp in hei s udy o i go e nance and boa d a ibu es’ oles in he pe o mance o saudi lis ed
i ms. howe e , Buallay e al. (2017) con ended ha ou side di ec o s had no impac on Fp. Mo eo e ,
hab oo (2022) conduc ed a s udy wi h he p ima y aim o examining he impac o boa d a ibu es on
he pe o mance o saudi lis ed banks. he esul s indica e ha Bi has a signi ican ad e se impac on
oA and oe, and posi i e e ec on Q. A ecen s udy has been done by Boshnak e al. (2023) o
in es iga e he in luence o cg mechanisms on saudi Fp be o e and du ing co iD-19. he esul s indi-
ca e ha while Bi a ec s oA nega i ely and signi ican ly, i has an insigni ican nega i e impac on
oe and Q.
hese ou comes almos indica e an ad e se o weak ole o he Bi on Fp, which can be pa ly a ibu ed
o he s uc u e o owne ship in saudi A abia and he dominance o con olling sha eholde s on saudi
co po a e boa ds who ha e a signi ican in luence on boa d composi ion wi h a endency o assign
boa d membe s wi h less independence, such as hei iends, ela i es, o loyalis s, o be e se e hei
in e es s a he expense o he igh s o mino i y sha eholde s (Alam i, 2014; Albassam, 2014; Boshnak,
2021). Acco dingly, i can be hypo hesized ha .
Hypo hesis 1. in a concen a ed owne ship en i onmen , Bi is nega i ely associa ed wi h bank pe o mance.
2.2. BIO and FP
Agency heo y sugges s ha manage s and di ec o s may ac oppo unis ically i hey a e no p ope ly
incen i ized (A. A. n. Abdallah & ismail, 2017; Kuma & Za oni, 2016; Wang e al., 2019). in line wi h he
con e gence o in e es s, Jensen & Meckling (1976) sugges manage ial owne ship as an impo an go -
e nance mechanism ha ac s as an incen i e o di ec o s o ake ac ions and make decisions ha max-
imize he alue o he i m and bene i all s akeholde s. When manage s own equi y in he company,
hei incen i es a e mo e closely aligned wi h hose o o he sha eholde s.
on he o he hand, he en enchmen hypo hesis indica es ha a highe le el o manage ial owne -
ship would nega i ely a ec Fp as manage s become mo e en enched o he ex en ha changing hem
o e en con olling hei ac s is mo e di icul and cos ly (Mo ck e al., 1988). Acco dingly, hey a e mo e
likely o ac oppo unis ically o se e hemsel es a he expense o o he sha eholde s, no ably, he
mino i y sha eholde s.
empi ical e idence on he impac o manage ial owne ship on Fp e ealed mixed esul s. some s ud-
ies ound a posi i e impac o manage ial owne ship on Fp (e.g. Al-Fa ooque e al., 2020; Boshnak, 2023).
o he s udies such as shan (2019) demons a ed a nega i e ole on Fp, while Al-Fa yan (2017) and
leubaye e al. (2020) documen ed an insigni ican e ec be ween he wo a iables.
Fu he in es iga ion e ealed ha his ela ionship is non-mono onic, e lec ing he compe i i e pe -
spec i es o bo h he con e gence o in e es s and he en enchmen hypo heses depending on he
le el o owne ship (chau & g ay, 2010; Joha i e al., 2008; Mo ck e al., 1988; shan, 2019; shan e al.,
2021). Fo ins ance, Mo ck e al. (1988) p o ided aluable insigh s in o he complex ela ionship be ween
manage ial owne ship and i m alue. he esul s indica ed ha he impac o manage ial owne ship on
i m alue is no linea , bu a he a ies ac oss di e en owne ship le els. Manage ial owne ship wi hin
he ange o 0-5% and abo e 25% can enhance i m alue due o he alignmen o in e es s be ween
manage s and sha eholde s. howe e , manage s a e mo e likely o en ench hemsel es wi h owne ship
le els anging be ween 5% and 25%.
6 o. s. hAB oo e Al.
Fu he mo e, shan (2019) ound ha he alignmen o in e es s occu s when boa d di ec o s own
equi y be ween 0% o 20% and abo e 50%, esul ing in imp o ed Fp. con e sely, an en enchmen e ec
is obse ed when hey ha e owne ship be ween 20% o 50%, leading o a dec ease in Fp.
in saudi A abia, owne ship is highly concen a ed and amily-con olled wi h a a ie y o con olling
sha eholde s who ha e di e en incen i es and hus e ec s on weal h maximiza ion and Fp (A ayssi &
Jizi, 2019). he e o e, he saudi cg egula ions (scg s) (cMA, 2006) and he p inciples o cg o banks
ope a ing in saudi A abia (pcgB) (sAMA, 2014) ecognized he signi ican ole o owne ship s uc u e on
boa d e ec i eness and Fp. Fo example, A icle 20 o he scg s and he de ini ion o independen
membe o he pcgB s ipula e ha he i m sha es owned by an independen boa d membe shall no
exceed 5%.
his go e nance ule may e lec he impo ance o he adeo be ween he bene i s and cos s o
di e en owne ship le els in he saudi con ex . his le el o Bio would p ese e Bi om he in luence o
managemen and con olling sha eholde s o ac mo e e ec i ely, as hey ha e become owne s who
ca e abou he company’s success and pe o mance. on he o he hand, his low le el o owne ship is
unlikely o enable independen di ec o s o en ench hemsel es o he ex en ha hey migh usu p
o he sha eholde s’ igh s.
Acco dingly, inline o he con e gence o in e es s hypo hesis, which domina es a a low le el o own-
e ship leading o be e Fp (Mo ck e al., 1988; shan, 2019), his s udy expec s a posi i e impac o Bio
on bank pe o mance as a esul o he alignmen o hei in e es s wi h hose o o he sha eholde s,
no ably mino i y owne s. hus, i can be hypo hesized ha .
Hypo hesis 2. in a concen a ed owne ship en i onmen , he e is a posi i e ela ionship be ween Bio and
bank pe o mance.
2.3. The mode a ion e ec o BIO on hei independence owa d FP
Mul i- heo e ical app oaches and mul i-me a-analyses conclude ha i is s ill challenging o de e mine
he e ec o an independen boa d on he company’s unc ioning (e.g. Finegold e al., 2007; pan e al.,
2018). his delica e mosaic may exempli y he sub le in e ac ion be ween co po a e success and Bi wi hin
he complex A abian go e nance amewo k.
As pea ce & Zah a (1992) highligh , he in ica e in e play be ween boa d composi ion and business
pe o mance depends on se e al con ex ual a iables, o ganiza ional ac o s, and en i onmen al con-
di ions. Mo e speci ically, he inconsis en and inconclusi e indings ega ding he in luence o Bi on
Fp can be a ibu ed o he use o di e en samples in di e en ju isdic ions and me hodological
amewo ks. Addi ionally, he di e en pe spec i es o agency and s ewa dship heo ies on Bi, a ying
assump ions on he alignmen o in e es s e sus en enchmen abou owne ship, and he po en ial
p esence o endogenei y issues among cg a iables con ibu e o he mixed esul s. such in icacies
necessi a e a ho ough explo a ion o he nuanced p ocesses in luencing he boa d composi ion– he
Fp link.
in ligh o hese deba es, schola s ha e b oadened hei ocus o in es iga e addi ional a iables ha
migh impac he link be ween Bi and business success. Za oni e al. (2017) examined how he na ional
business sys em (nBs) mode a es he link be ween non-execu i e di ec o s and a i m’s inancial pe o -
mance. hei esea ch, encompassing domes ic ini ial public o e ings (ipos) om a ious global locales,
posi s ha nBs signi ican ly empe s he connec ion be ween i ms’ inancial pe o mance and Bi. his
p oposi ion is suppo ed by empi ical e idence, indica ing a complex in e play be ween Bi and he inan-
cial pe o mance o ipos, wi h nBs ma kedly mode a ing he posi i e di ec e ec o Bi.
pan e al. (2018) in es iga ed how he p esence o new compe i o s a ec s he associa ion be ween
Bi and Fp in he i sec o in he uni ed s a es. hey con end ha he e e -changing en i onmen in
which a company wo ks has a c ucial ole in in luencing he di ec link be ween Bi and business success.
hey sugges ed ha he exis ence o subs an ial new en y challenges is an impo an con ex ual ele-
men ha in luences his connec ion. he empi ical indings sugges ha when aced wi h signi ican
challenges om new compe i o s, companies wi h mo e au onomous di ec o s achie e be e pe o -
mance han hose wi h boa ds wi h less independence.
cogen Business & MAnAgeMen 7
in an in e na ional sample o businesses, u ibe-Boho quez e al. (2018) examined whe he ins i u ional
de e minan s ep esen ed by he legal sys em a ec he link be ween Bi and Fp. he empi ical indings
con i m he p emise ha he legal amewo k posi i ely mode a es he associa ion be ween Bi and Fp.
Waheed & Malik (2019) examined how he concen a ion o owne ship mode a es he co ela ion be ween
boa d ea u es and Fp. he indings sugges ha a high le el o sha e owne ship has a a o able and
subs an ial impac on he ela ionship be ween boa d cha ac e is ics and Fp.
he mode a ing ole o boa d policies on he co ela ion be ween Bi and Fp in he ho el and ou is
indus ies has been he subjec o ecen esea ch by nime e al. (2023). howe e , mode a ion analysis
indica es ha boa d policies do no a ec he in luence o Bi on pe o mance. Fu he mo e, he esea ch
conduc ed by Xu e al. (2023) examined how legal ju isdic ion in luences he di ec connec ion be ween
cg and he inancial pe o mance o he la ges publicly lis ed amily con olled en e p ises globally.
empi ical indings sugges ha he in luence o Bi on Fp is highe in common law coun ies han in ci il
law se ings.
in addi ion o he abo e men ioned a emp s o in es iga e he po en ial ac o s ha mode a e he
associa ion be ween boa d s uc u e and Fp, heo e ical pe spec i es and empi ical e idence sugges ha
owne ship s uc u e is a signi ican ac o a ec ing bo h boa d composi ion and Fp (e.g. gau e al., 2015;
hab oo , 2020; Mo ck e al., 1988; shan, 2019; Waheed & Malik, 2019; Wangwan & leemakdej, 2023).
Fo example, hu e al. (2010), shan & Mci e (2011), and Wang e al. (2019) ound ha Fp is nega i ely
a ec ed by owne ship concen a ion. using me a-analysis echniques o 419 co ela ions collec ed om
42 s udies in 18 eme ging ma ke s, Wang & shaile (2015) in es iga ed he in luence o owne ship con-
cen a ion on Fp. he esul s indica ed ha Fp is nega i ely a ec ed by owne ship concen a ion ac oss
coun ies.
Mo eo e , Bansal & henmozhi (2020) in es iga ed how con olling sha eholde s a ec boa d s uc u e
and Bi. hey ound ha con olling sha eholde s ha e a signi ican impac on boa d s uc u e and display
a non-mono onic connec ion. As hei owne ship ises, he ela ionship shi s om en enchmen o
alignmen , hen back o en enchmen . he non-mono onic pa e n obse ed emphasizes he need o
companies o ca e ully manage he in luence o con olling sha eholde s o p omo e e ec i e cg and
long- e m sus ainabili y.
shan (2019) indica ed ha he in luence o co po a e owne ship on bo h Bi and Fp depends on he
owne ship le el. he empi ical esul s indica ed ha a highe le el o manage ial owne ship is ela ed o
lowe Fp. he esul s also e ealed ha a highe le el o manage ial owne ship a ec s Bi nega i ely. his
sugges s ha manage s wi h a la ge owne ship s ake may ha e mo e in luence o e he composi ion
and decision-making o he boa d, po en ially comp omising i s independence.
in he saudi con ex , he nega i e impac o owne ship concen a ion on Fp was documen ed (e.g.
Buallay e al., 2017; hab oo , 2020, 2022). Fo ins ance, hab oo (2020) examined how concen a ed own-
e ship a ec s he link be ween boa d composi ion and Fp. he esul s show ha he concen a ion o
sha e owne ship has an ad e se and subs an ial mode a ing in luence on his link. his inding indica es
ha con olling sha eholde s and hei ep esen a i es on he boa d and managemen wield signi ican
in luence o e he boa d composi ion and independence, leading o dec eased bank pe o mance.
he Kingdom o saudi A abia’s owne ship s uc u e, cha ac e ized by high concen a ion, c ea es a
conduci e en i onmen o he implemen a ion o he con e gence o in e es s and he en enchmen
hypo heses, which play a signi ican ole in de e mining how well a co po a ion pe o ms. Fo ins ance,
a signi ican manage ial owne ship posi ion may lessens con lic s be ween con olling sha eholde s and
manage s as a esul o he con e gence o in e es s (e.g. Mo ck e al., 1988; shan, 2019). ne e heless,
his gi es ise o a pa adox, since i heigh ens he awa eness o po en ial agency p oblems among bo h
majo i y and mino i y sha eholde s. Wi hin he cg domain, he ac o gi ing mo e impo ance o he
p ese a ion o inancial in e es s by in luen ial s akeholde s some imes akes p ecedence o e de ending
he igh s o indi idual and mino i y sha eholde s. howe e , his endency o p io i ize weal h p ese a-
ion migh diminish he alue o he o ganiza ion. in con as , he en enchmen hypo hesis wa ns
agains he dominance o en enchmen pa e ns exe cised by con olling sha eholde s (e.g. Allam, 2018;
Wangwan & leemakdej, 2023). his means ha dominan owne s may un ai ly di e esou ces om
o he sha eholde s as hey bea only a ac ion o he cos s, bu hey gain ull bene i s, which may ha m
company pe o mance (e.g. Allam, 2018; gugle & Yu oglu, 2003).
14 o. s. hAB oo e Al.
4.3. Mul i a ia e analysis
he ou comes o he Fgls eg ession analysis o es he s udy hypo heses and sc u inize he mode a -
ing e ec o Bio on he co ela ion be ween hei independence and bank pe o mance a e shown in
able 2.
As shown in able 2, Models 1, 3, and 5 epo he impac o he independen a iables Bi and Bio
alongside con ol a iables on bank pe o mance. he ou comes e eal a signi ican ad e se impac o Bi
on oe. howe e , he nega i e in luence on oA and Q is no signi ican . hese esul s clea ly depic
he inabili y o independen boa d membe s o bols e pe o mance, con a y o agency heo y, while
concu en ly a i ming he ene s o s ewa dship and ins i u ional heo ies ha conside independen
boa d membe s o be less expe ienced and compe en han manage s, and hei p esence may only be
o egula o y conside a ions.
hese indings a e consis en wi h p io e idence (e.g. Al-Fa yan, 2017; Al-gam h e al., 2020; Anas
e al., 2023; Boshnak e al., 2023; Koji e al., 2020). he de imen al e ec o Bi on saudi banks’ pe o -
mance can be pa ly asc ibed o he s uc u e o owne ship and he o midable sway o con olling
sha eholde s, encompassing amily, ins i u ional, and go e nmen owne s, on saudi co po a e boa ds
who ha e a signi ican in luence on boa d composi ion wi h a endency o assign boa d membe s wi h
less independence, such as hei iends, ela i es, o loyalis s, o be e se e hei bes in e es s a he
expense o he igh s o mino i y sha eholde s. hus, in an en i onmen cha ac e ized by owne ship con-
cen a ion, he me e exis ence o independen and non-execu i e boa d membe s does no au oma i-
cally gua an ee genuine independence.
his phenomenon was obse ed by Boshnak (2021), Boshnak e al. (2023), and hab oo (2020), among
o he s in he saudi con ex . his implies ha con en ional go e nance mechanisms such as Bi may ail
o mee hei objec i es in he con ex o highly concen a ed owne ship in he co po a e wo ld. Fo
example, A icle 12 o he scg s (cMA, 2006) s a es ha he numbe o independen di ec o s shall no
be less han wo membe s o one- hi d o he boa d membe s, whiche e is g ea e . Mo eo e , p inciple
2 o he pcgB (sAMA, 2014) s ipula es ha a leas wo boa d membe s mus be independen . in his
ega d, he desc ip i e s a is ics indica e ha he mean o Bi is 0.501(i.e. mo e han 5 membe s a e inde-
penden ) wi h a maximum o 1.00 (i.e. all boa d membe s a e independen ) and a minimum o 0.22 (i.e.
2 membe s a e independen ), his means ha mo e han hal o he boa d membe s a e independen
on a e age. Despi e he high compliance o he s udy sample wi h saudi cg equi emen s ega ding he
ep esen a ion o independen membe s on he boa d o di ec o s, hey nega i ely a ec bank
pe o mance.
his esul may shed ligh on he e ec i eness o saudi cg mechanisms, especially independen boa d
membe s, as an impo an go e nance ool o moni o and di ec managemen owa ds be e pe o -
mance and highe p o ec ion o he igh s o all s akeholde s, no ably mino i y sha eholde s. his inding
would be o in e es o he saudi egula o y au ho i ies o assess he e ec i eness o cu en go e nance
mechanisms and iden i y he necessa y e o ms.
Fo Bio, he esul s demons a e a signi ican posi i e e ec o Bio on oA and oe, while Q is
insigni ican ly co ela ed wi h Bio, which indica es ha bank sha es held by independen boa d membe s
lead o highe bank ope a ional and inancial pe o mance. his ou come p o ides suppo o hypo hesis
2 o he s udy and he hypo hesis o he con e gence o in e es s s emmed om agency heo y (Jensen
& Meckling, 1976), which sugges s ha owne ship by independen di ec o s can enhance he bank ope -
a ional and inancial pe o mance due o he alignmen o hei in e es s wi h hose o o he sha ehold-
e s. his inding sugges s ha independen di ec o ’s owne ship can be used as an e ec i e go e nance
mechanism ha ac s as an incen i e o di ec o s o ake ac ions and make decisions ha maximize i m
alue and bene i all s akeholde s. he posi i e impac Bio on Fp is suppo ed by p e ious s udies, such
as sheikh & Alom (2021) who ound ha boa d membe s’ owne ship enhances Fp, while he s udy by
Allam (2018) con i med he posi i e ole o non-execu i e di ec o s’ owne ship on Fp. he esul s a e also
consis en wi h p io e idence on he supe io i y o he con e gence o in e es s hypo hesis agains he
en enchmen hypo hesis, no ably a a low le el o di ec o owne ship, leading o be e Fp (chau &
g ay, 2010; Joha i e al., 2008; Mo ck e al., 1988; shan, 2019; shan e al., 2021). in his ega d, he
desc ip i e s a is ics show ha he a e age le el o owne ship owned by all independen membe s on
cogen Business & MAnAgeMen 15
he boa d is less han 10% (0.097) o bank sha es. A such a low le el o di ec o owne ship, Mo ck e al.
(1988) and shan (2019), among o he s, ound an inc ease in Fp due o he alignmen o in e es s be ween
di ec o s and o he sha eholde s.
his esul con i ms he posi i e e ec o he con e gence o in e es s on saudi bank pe o mance
when owne ship by independen boa d membe s a a low le el because o he alignmen o in e es s
be ween independen boa d membe s and o he sha eholde s, especially mino i y owne s.
ega ding con ol a iables, he analysis indica es subs an ial esul s consis en wi h p e ious e idence
ha la ge banks (Alajmi & Wo hing on, 2023; Ali e al., 2024) wi h expansi e boa ds (Ali e al., 2024;
saha & Maji, 2022) and lesse educa ed boa d membe s (Boadi & osa o, 2019; hab oo , 2022) expe ience
an inc ease in hei o e all pe o mance.
Models 2, 4, and 6 in able 2 inco po a e he esul s o he impac o he in e ac i e e m Bio*Bi on
he link be ween Bi and bank pe o mance. he esul s indica e ha he in e ac i e e m Bio*Bi has a
signi ican posi i e impac on oe and Q. howe e , he posi i e e ec o Bio*Bi on oA is no signi i-
can . he signi ican ou comes sugges ha Bio mi iga es hei ad e se impac on bank inancial and
ma ke pe o mance. he de e minan al impac o Bi on pe o mance is a enua ed in banks in which
independen boa d membe s hold a highe p opo ion o bank sha es. his means ha he ad e se and
weak ole o independen boa d membe s on bank pe o mance can be elimina ed o mode a ed posi-
i ely by ha ing a ce ain amoun o bank sha es, enabling hem o unc ion as in luen ial mino i y
owne s who ha e aligned in e es s wi h o he sha eholde s. hey a e no longe jus ou side s, bu also
owne s who may be mo e inclined o ake a long- e m iew o he company’s pe o mance and o push
o s a egies ha will bene i all sha eholde s in he long un. in o he wo ds, Bi would be e icien when
he con e gence o in e es s be ween independen boa d membe s and o he sha eholde s is engaged.
his ou come obus ly alida es he s udy’s a gumen g ounded in agency heo y and he con e gence
o in e es s hypo hesis, he eby lending suppo o he hi d hypo hesis o he s udy.
in an en i onmen cha ac e ized by owne ship concen a ion and con olling sha eholde s’ dominance,
as is he case o saudi A abia, agency con lic s be ween majo i y and mino i y sha eholde s may be
exace ba ed by con olling en i ies owning a signi ican po ion o bank sha es and placing hei ep e-
sen a i es in c i ical posi ions o en ench hemsel es and se e hei p i a e bene i s on he expense o
mino i y sha eholde s. he e o e, i is in hei in e es o p e en independen di ec o s om ca ying ou
hei moni o ing and supe iso y du ies (Ande son & eeb, 2004; Ba ako e al., 2006; Boshnak, 2021) and
ac in he bes in e es s o all sha eholde s (shan, 2019). speci ic con en ional go e nance mechanisms,
such as Bi, may al e in such a si ua ion (guney e al., 2020). hus, he e ec i eness o he boa d o
di ec o s in o e seeing execu i es and es aining he g eedy impulses o con olling sha eholde s may
be comp omised.
howe e , when independen boa d membe s hold a ce ain amoun o bank sha e, a a low le el, hey
a e less subjec o he o e powe ing con ol o dominan sha eholde s. his enhanced owne ship s a us
os e s a g ea e sense o au onomy, p omp ing hem o assume a mo e ac i e ole akin o ha o own-
e s. consequen ly, hey become mo e igilan and p oac i e in moni o ing and s ee ing execu i e man-
agemen ac ions owa d highe Fp. he a i ma i e mode a ion e ec o Bio unde sco es he p e alence
o a con e gence o in e es s be ween hese boa d membe s and sha eholde s, p edominan ly mino i y
sha eholde s. his alignmen mi iga es he ad e se in luence o independen boa d membe s—o en
swayed by dominan sha eholde s—on bank pe o mance. his a gumen is suppo ed by he indings
o he s udy o shan (2019) who ound ha when he con e gence o in e es s e ec p edomina ed a
a low le el o 0%–20% o di ec o owne ship, Bi would be e ec i e and a o ably connec ed o Fp.
he posi i e e ec o he con e gence o in e es s on he ela ionship be ween Bio and bank pe o -
mance is con i med by he obse ed low le el o bank sha es owned by independen boa d membe s
(0.097), which alling wi hin he ca ego y o low owne ship (i.e. 0-20%), whe e he e ec o he con e -
gence o in e es s a e pa icula ly p onounced (e.g. chau & leung, 2006; pa k & Jang, 2010; shan, 2019).
in his ega d, A icle 20 o he scg s and he de ini ion o boa d membe by he pcgB (cMA, 2006;
sAMA, 2014) s ipula e among o he hings, ha he owne ship o an independen boa d membe shall
no exceed 5% o he company’s sha es. his go e nance ule may e lec he aim o saudi egula o y
au ho i ies o keep his ype o owne ship low as an incen i e o independen boa d membe s o pe -
o m hei moni o ing du ies e ec i ely and ac in he bes in e es s o all sha eholde s due o he
16 o. s. hAB oo e Al.
p e alen e ec o he con e gence o in e es s be ween hem and all sha eholde s, leading o be e Fp
(Mo ck e al., 1988; shan, 2019).
Acco dingly, he indings o his s udy con i m he posi i e e ec o he con e gence o in e es s on
he link be ween Bi and saudi bank pe o mance when owne ship by independen boa d membe s is
low. his is an impo an inding o saudi egula o s, companies, and ma ke pa icipan s o e alua e
and unde s and he dual and con lic ing e ec s and oles o owne ship on cg mechanisms and Fp.
he esul s o he independen and con ol a iables a e simila o hose epo ed in Models 1,
3, and 5.
4.4. Robus ness and endogenei y checks
since he esul s o he independen and con ol a iables in Models 1, 3, and 5 in able 2 emain
unchanged when adding he in e ac i e e m in Models 2, 4, and 6, he e o e supplemen a y analyses
will be conduc ed o asce ain he obus ness and alida ion o he main ou comes epo ed on he
in e ac i e e m Models 2, 4, and 6 in able 2.
Fi s , ollowing he app op ia e analy ical me hods ou lined in he da a analysis sec ion, ols is applied
o he oA and oe Models, whe eas he andom-e ec s echnique is employed o he Q Model. panel
A o able 5 de ails he eg ession ou comes o he ols and andom-e ec s analyses. he indings a e
almos he same as hose epo ed in Models 2, 4, and 6 o able 2, which enhances he obus ness o
he ini ial esul s.
o gua an ee he obus ness o he ini ial indings ob ained om he Fgls, his s udy applies he ols
coe icien s wi h panel-co ec ed s anda d e o s (pcse), because Beck & Ka z (1995) cau ion agains
o e eliance on Fgls when he c oss-sec ional dimension (n) is la ge han he ime dimension ( ), as in
he cu en s udy, whe e n is 12 and is 10. he e o e, Beck & Ka z (1995) ad oca ed employing he
pcse. he esul s in panel B o able 5, de i ed using ols coe icien s wi h pcse, a e almos iden ical
wi h hose epo ed in Models 2, 4, and 6 o able 2, which con i ms he obus ness o he ini ial indings
agains he e oskedas ici y and au oco ela ion challenges (Beck & Ka z, 1995).
second, i is c ucial o add ess endogenei y p oblems inhe en in esea ch on he in e ac ion be ween
cg and Fp (gi aldez-puig & Be engue , 2018; la i e al., 2020; alen i e al., 2011; Win oki e al., 2012,
among o he s). Many possible causes equi e ca e ul analysis, including he e ogenei y, omi ed a iable
bias, simul anei y o e e se causa ion, and dynamic endogenei y. he ac ics sugges ed by li (2016)
include a a ie y o econome ic echniques, such as ixed-e ec s es ima ions, ins umen al a iables,
gene alized Me hod o Momen s (gMM), lagged alues, and con ol a iables. p io s udies employed
each o hese echniques o a ying deg ees o mi iga e he challenges posed by endogenei y bias.
While he ixed e ec s eg ession model may yield biased and inconsis en esul s in he p esence o
au oco ela ion p oblems, i can be pa ially used o handle some aspec s o endogenei y, such as omi -
ed a iables bias (W. Abdallah e al., 2015; Ali e al., 2024; cha e jee & nag, 2023; Dodd & Zheng, 2022;
Khidma e al., 2020; li, 2016; nime e al., 2023). panel A o able 6 p esen s he esul s o he ixed
e ec s eg ession models. Al hough he esul s on he impac o he in e ac i e e m Bio*Bi a e consis-
en wi h hose epo ed in Models 2, 4, and 6 o able 2, he e a e some di e ences in he esul s o
some independen and con ol a iables. Fo example, he insigni ican nega i e impac o Bi on oA
and Q becomes signi ican , suppo ing hypo hesis 1 ha posi s ha Bi would lead o lowe bank pe -
o mance. Mo eo e , he signi ican posi i e impac o Bio on oA becomes insigni ican .
Fo con ol a iables, he esul s show ha he signi ican posi i e e ec o Bs on all bank pe o -
mance measu es becomes signi ican ly nega i e. Fu he mo e, he signi ican nega i e in luence o Be on
all bank pe o mance measu es becomes insigni ican . in addi ion, he signi ican posi i e co ela ion
be ween Fs and all bank pe o mance measu es becomes signi ican ly nega i e only wi h Q, while oA
and oe a e nega i ely bu insigni ican ly ela ed o Bs. hese esul s may indica e ha la ge banks wi h
expansi e boa ds expe ience a decline in hei pe o mance. As hese indings a e ob ained in he p es-
ence o au oco ela ion which may no be e ec i ely deal wi h using ixed e ec s eg ession analysis,
in e ences om hese esul s should be made wi h cau ion.
his s udy u he add esses endogenei y and omi ed a iable issues h ough he ins umen al a i-
ables app oach (e.g. Abdallah e al., 2015; Ang is & K uege , 2001; Besim, 2023; hu e al., 2023; nime
cogen Business & MAnAgeMen 17
e al., 2023). Acco ding o Woold idge (2010), a easonable ins umen al a iable should be co ela ed
wi h a ele an independen o endogenous a iable ( ele ance condi ion), bu unco ela ed wi h he
model’s e o e m (exclusion condi ion).
conside ing he da ase and a iables, his s udy employs ins umen al a iables es ima ion using he
wo-s age leas squa es (2sls) me hod wi h lagged alues o po en ial endogenous a iables co ela ed
wi h boa d cha ac e is ics, owne ship s uc u e, and bank-speci ic cha ac e is ics, while emaining unco -
ela ed wi h he model’s e o e m. Mo e speci ically, he lagged alues o boa d independence, boa d
size, boa d educa ion, independen boa d membe s’ owne ship, go e nmen al owne ship, amily owne -
ship, and bank size we e used as ins umen s by his s udy. hese lagged a iables we e adop ed as
good ins umen s o add ess he endogenei y issue in p io s udies dealing wi h he associa ion be ween
cg mechanisms and Fp (e.g. Allam, 2018; And es, 2008; Assenga e al., 2018; guney e al., 2020;
Kanapa hippillai e al., 2019; Kao e al., 2019; shan, 2019; Y. Wang e al., 2019; Xu e al., 2023).
B own e al. (2011) jus i y using pas alues as ins umen s o cu en alues because hey a e less
likely o be endogenous o he dependen a iable han cu en alues. howe e , hey a e also likely o
be weake and hus less ele an han cu en alues.
wo main speci ica ion es s we e conduc ed o jus i y and alida e he selec ed ins umen al a i-
ables. Fi s , he c agg-Donald es o weak ins umen s ela ed o he ele ance condi ion yielded an
F-s a is ic alue o 37.68 wi h a signi ican p- alue a 1%, as shown in panel B o able 6. his alue
su passes he abula ed c i ical alues o he s ock -Yogo weak iD es , con i ming he ele ance o
he selec ed ins umen al a iables and dismissing conce ns abou weak ins umen s. second, he
sa gan es o o e -iden i ica ion es ic ions ela ed o he exclusion condi ion yielded insigni ican
esul s, as epo ed in panel B o able 6, which ails o ejec he null hypo hesis ha ins umen al
a iables do no co ela e wi h he e o e m, a i ming he alidi y o ins umen al a iables in
he models.
panel B o able 6 p esen s he esul s o he 2sls eg ession models. he ou comes a e e y simila
o he p ima y esul s in Models 2, 4, and 6 o able 2, sugges ing ha he esul s a e unlikely o be
subjec ed o endogenei y.
Table 5. Robus ness checks using oLs, Re, and PCse.
Panel a Panel B
oLs oLs Re PCse PCse PCse
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
Va iables Roa Roe Q Roa Roe Q
Independen a iables
Bi −0.0962 −0.347*** −0.0478 −0.0870 −0.286*** −0.0520
(0.0741) (0.0756) (0.0903) (0.0659) (0.0844) (0.106)
Bio 0.134* 0.179** −0.0879 0.140*** 0.177*** −0.106
(0.0752) (0.0767) (0.0980) (0.0506) (0.0567) (0.0823)
In e ac i e e m
Bi*Bio 0.0533 0.315*** 0.295*** 0.0151 0.241*** 0.188***
(0.0706) (0.0720) (0.0884) (0.0409) (0.0428) (0.0667)
Con ol a iables
Boa d cha ac e is ics
Bs 0.559*** 0.644*** 0.564*** 0.410*** 0.513*** 0.510**
(0.136) (0.139) (0.181) (0.124) (0.131) (0.209)
Be −0.270*** −0.327*** −0.342*** −0.247*** −0.291*** −0.265*
(0.0973) (0.0993) (0.127) (0.0922) (0.102) (0.140)
Owne ship s uc u e
go 0.0920 −0.0781 −0.111 0.0870 −0.0927 −0.0829
(0.129) (0.131) (0.165) (0.106) (0.118) (0.154)
Fo −0.0783 −0.0235 0.271 0.0115 0.0348 0.230
(0.131) (0.134) (0.174) (0.142) (0.124) (0.187)
Fi m cha ac e is ics
Fs 0.482*** 0.260** −0.0117 0.529*** 0.338*** 0.0680
(0.115) (0.117) (0.146) (0.0943) (0.109) (0.177)
Cons an −0.0106 −0.0870 −0.0978 0.0124 −0.0688 −0.0162
(0.0656) (0.0670) (0.104) (0.115) (0.119) (0.250)
Model F 17.53*** 16.33*** 39.06*** 231.00*** 291.72*** 45.14***
R20.574 0.557 0.661 0.414 0.426 0.206
N113 113 113 113 113 113
no es: *, **, *** s a is ically signi ican a 10, 5, and 1 pe cen le els, espec i ely. s anda d e o s a e in b acke s.
18 o. s. hAB oo e Al.
Despi e he widesp ead use o he 2sls app oach in empi ical s udies add essing endogenei y among
he in es iga ed a iables, he e a e conce ns abou he choice o app op ia e and alid ins umen s
(campbell e al., 2008). he e o e, A ellano & Bond (1991) in oduced and ad anced he gMM as an
e ec i e emedy o add essing endogenei y issues, including unobse ed he e ogenei y, simul anei y,
and dynamic endogenei y, which o he he apeu ic app oaches canno p ope ly add ess. Mo eo e , gMM
is obus o he e oskedas ici y and au oco ela ion, e en in models wi h ela i ely small sample sizes
(so o, 2009). Acco ding o li (2016), gMM is he bes emedy o endogenei y, as i has he g ea es
co ec ion e ec on he coe icien s among all he p oposed econome ic emedies o endogenei y.
o u he add ess endogenei y issues and accoun o he e oskedas ici y and au oco ela ion, his
s udy applied he wo-s ep sys em gMM app oach using ins umen s o lagged dependen a iable
Table 6. endogenei y con ol using Fe, 2sLs, and gMM analyses.
Va iables
Panel a Panel B Panel C
Fe Fe Fe 2sLs 2sLs 2sLs gMM gMM gMM
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9
Roa Roe Q Roa Roe Q Roa Roe Q
independen a iables
(main e ec )
Bi −0.220** −0.393*** −0.181** −0.110 −0.327*** −0.0739 −0.0566 −0.144** −0.0440
(0.0805) (0.0843) (0.0720) (0.0708) (0.0751) (0.0910) (0.0754) (0.0710) (0.0820)
Bio 0.138 0.287** −0.0900 0.187** 0.202** −0.00390 0.0961 0.101 −0.121
(0.126) (0.120) (0.116) (0.0859) (0.0912) (0.110) (0.101) (0.0674) (0.0896)
in e ac i e e m
Bio*Bi 0.0648 0.149* 0.199** 0.0457 0.262*** 0.273*** 0.00428 0.126** 0.149*
(0.0867) (0.0790) (0.0853) (0.0710) (0.0754) (0.0913) (0.0633) (0.0522) (0.0797)
Con ol a iables
Boa d cha ac e is ics
Bs −0.240** −0.353*** −0.539** 0.666*** 0.781*** 0.712*** 0.324** 0.253* 0.503**
(0.100) (0.113) (0.197) (0.159) (0.169) (0.204) (0.161) (0.130) (0.235)
Be −0.126 0.129 0.0424 −0.280*** −0.397*** −0.339** −0.172* −0.163* −0.337**
(0.0854) (0.149) (0.212) (0.108) (0.114) (0.138) (0.0900) (0.0888) (0.156)
Owne ship s uc u e
go 0.129 −0.0257 −0.164 0.125 0.0359 −0.145 0.0650 0.00102 −0.00618
(0.102) (0.159) (0.218) (0.127) (0.134) (0.163) (0.0817) (0.0799) (0.111)
Fo 0.253 0.177 0.0541 −0.164 −0.0976 0.127 −0.0945 0.0306 −0.118
(0.199) (0.149) (0.124) (0.136) (0.144) (0.174) (0.0885) (0.0745) (0.161)
Fi m cha ac e is ics
Fs 0.304 −0.341 −1.063*** 0.411*** 0.0983 0.0600 0.311** 0.0303 −0.0474
(0.305) (0.410) (0.213) (0.116) (0.123) (0.149) (0.133) (0.105) (0.117)
L.Roa 0.368**
(0.145)
L.Roe 0.492***
(0.0964)
L. Q 0.490***
(0.106)
Cons an −0.0389 −0.0402 −0.0610** −0.0134 −0.0531 −0.132* −0.00974 −0.0393 0.00539
(0.0230) (0.0235) (0.0246) (0.0616) (0.0654) (0.0792) (0.0669) (0.0543) (0.0784)
Model F 6.56*** 13.47*** 44.78*** 16.94** 12.56*** 7.12*** 28.19*** 26.23*** 18.87***
R20.135*** 0.238*** 0.278*** 0.586*** 0.518*** 0.381*** 0.626*** 0.656*** 0.513***
N113 113 113 101 101 101 101 101 89
Random-e ec s es
(p- alue)
1.000 0.205 0.001
Fixed-e ec s es
(F- es )
0.012 0.000 0.000
Hausman es
(P- alue)
0.014 0.004 0.000
He e oskedas ici y
es (p- alue)
0.000 0.000 0.000
Au oco ela ion es
(p- alue)
0.000 0.044 0.000
C agg–Donald es 37.68*** 37.68*** 37.68*** 42.64*** 39.42*** 11.040***
Sa gan es (p- alue) 0.520 0.651 0.792
AR (1) es (p- alue) 0.666 −0.824 0.084
AR (2) es (p- alue) 0.716 −0.893 −0.710
Hansen es (p- alue) 0.820 0.285 0.615
no es: *, **, *** s a is ically signi ican a 10, 5, and 1 pe cen le els, espec i ely. s anda d e o s clus e ed a he bank le el a e in
b acke s.
cogen Business & MAnAgeMen 19
measu es and endogenous a iables wi h app op ia e lag(s) (e.g. Ali e al., 2024; cha e jee & nag, 2023;
Fayyaz e al., 2023; gull e al., 2023).
wo main es s we e ca ied ou o ensu e he e iciency o he gMM es ima ion and e i y he alidi y
o he lagged a iables used as ins umen s. Fi s , he esul s o he A ellano-Bond es o second-o de
au oco ela ion A (2) epo ed in panel c o able 6 e ealed insigni ican p- alues o all models. hese
esul s indica e ha he gMM models do no su e om second-o de se ial co ela ions. second, he
hansen es o o e -iden i ica ion es ic ions p oduced insigni ican ou comes o all models, which ails
o ejec he null hypo hesis ha he ins umen s a e no co ela ed wi h he e o e m, con i ming ha
he ins umen s a e exogenous, and hus he gMM models a e alid.
panel c o able 6 p esen s he esul s o he gMM eg ession models. he ou comes a e consis en
wi h he p ima y esul s in Models 2, 4, and 6 o able 2.
hese comp ehensi e analyses o ins umen al a iables u he subs an ia e he obus ness o he
s udy’s indings agains endogenei y conce ns.
hi d, o iden i y he exac alue (compu ed by he 2- change) and check i s signi icance (examined
by he p- alue o F-change es ) ha he in e ac i e e m Bio*Bi con ibu es in explaining he a ia ions
in bank pe o mance in addi ion o epo he con ibu ion o included a iables in he s udy models,
he hie a chical eg ession analysis is applied ollowing p e ious s udies (e.g. Dankwah e al., 2024; im &
chung, 2017; le e al., 2006; limbasiya & shukla, 2019; liu e al., 2022; Za oni e al., 2017). in addi ion
o i s abili y o iden i y he e ec o each p edic o a iable, he hie a chical eg ession app oach assis s
in pinpoin ing he p ecise alue ha he mode a o con ibu es o he ela ionship be ween he p edic-
o and ou come (Aguinis e al., 2008; odoom & Mensah, 2019).
Fo each model assessing he bank pe o mance indica o s ( oA, oe, and Q), a ou -s ep hie a chical
eg ession analysis is conduc ed o epo he eg ession esul s along wi h he 2-change, F-change, and p- alue
o F-change pe s ep. he ini ial s ep eg esses he dependen a iables ( oA, oe, and Q) on he con ol a i-
ables. he Bi is in oduced in o he equa ion model in he second s ep. in he hi d s ep, he Bio is included.
Finally, he ou h s ep inco po a es he in e ac i e e m Bio*Bi. able 7 epo s he esul s o he hie a chical
eg ession analysis. By ocusing on he in e ac i e e m Bio*Bi, he ou comes o model 4 in he ou h s ep
indica e ha when Bio*Bi is added, he 2 inc eases e y sligh ly om 0.572 o 0.574, yielding an 2-change o
0.002. o de e mine whe he his ma ginal change in he 2 signi ican ly imp o es he model p edic ion, he
F-change es which is based on F- es is used. he insigni ican p- alue o he F-change (0.452) o Bio*Bi in
Model 4 clea ly sugges s ha Bio*Bi has no explana o y powe o e he ela ionship be ween Bi and oA.
Mo eo e , he ou comes o models 8 and 12 show ha adding he Bio*Bi inc eases he 2 om 0.475
o 0.557 in model 8 and om 0.325 o 0.389 in model 12. hese 2 changes o 0.081 in model 8 and
0.064 in model 12 a e highly signi ican , as e idenced by he signi ican p- alue o he F-change es a
he 0.000 and 0.001 le el, espec i ely, sugges ing ha Bio has a signi ican explana o y powe o e he
ela ionship be ween Bi and bo h oe and Q.
5. Conclusions
his s udy aims o sc u inize how independen di ec o s’ owne ship in luences he impac o Bi on pe -
o mance o saudi banks lis ed on adawul om 2009 o 2018. employing a ious s a is ical me hodolo-
gies, including Fgls, ols, andom-e ec s, pcse, ixed-e ec s, 2sls, and gMM, and hie a chical analysis,
his s udy es s i s hypo heses and ensu es esul accu acy while mi iga ing po en ial endogenei y issues
ac oss he en-yea pe iod.
he indings align wi h he ene s o cg- ela ed heo ies, especially agency heo y and he con e -
gence o in e es s hypo hesis agains he en enchmen hypo hesis, lending obus suppo o he s udy’s
heo e ical pe spec i e. he esul s indica e a signi ican nega i e in luence o Bi on bank pe o mance,
which may e lec he in e en ion o con olling sha eholde s and hei ep esen a i es in boa d com-
posi ion and i s independence.
Mo eo e , he esul s show a signi ican posi i e e ec o Bio on oA and oe, while Q is insigni i-
can ly co ela ed wi h Bio, which con i ms he posi i e e ec o he con e gence o in e es s on saudi
bank ope a ional and inancial pe o mance when independen boa d membe s own a ce ain amoun
o bank equi y a a low le el as e iden om he summa y o he desc ip i e s a is ics.
20 o. s. hAB oo e Al.
Table 7. Hie a chical eg ession analysis.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
Va iables Roa Roa Roa Roa Roe Roe Roe Roe Q Q Q Q
Con ol a iables
Boa d cha ac e is ics
Bs 0.564*** 0.562*** 0.556*** 0.559*** 0.642*** 0.636*** 0.626*** 0.644*** 0.631*** 0.631*** 0.634*** 0.650***
(0.137) (0.138) (0.136) (0.136) (0.161) (0.156) (0.150) (0.139) (0.169) (0.170) (0.171) (0.163)
Be −0.295*** −0.299*** −0.269*** −0.270*** −0.351*** −0.373*** −0.324*** −0.327*** −0.301** −0.302** −0.318** −0.321***
(0.0966) (0.0972) (0.0971) (0.0973) (0.113) (0.110) (0.107) (0.0993) (0.119) (0.120) (0.122) (0.117)
Owne ship s uc u e
go 0.0611 0.0757 0.124 0.0920 −0.0490 0.0316 0.112 −0.0781 0.0204 0.0235 −0.00245 −0.172
(0.117) (0.120) (0.121) (0.129) (0.137) (0.136) (0.134) (0.131) (0.144) (0.148) (0.152) (0.154)
Fo −0.0759 −0.0621 −0.0871 −0.0783 −0.110 −0.0337 −0.0754 −0.0235 0.131 0.134 0.147 0.193
(0.129) (0.132) (0.131) (0.131) (0.151) (0.149) (0.144) (0.134) (0.159) (0.163) (0.164) (0.157)
Fi m cha ac e is ics
Fs 0.528*** 0.510*** 0.473*** 0.482*** 0.368*** 0.270** 0.208 0.260** 0.0252 0.0214 0.0413 0.0873
(0.109) (0.114) (0.114) (0.115) (0.128) (0.129) (0.126) (0.117) (0.135) (0.141) (0.143) (0.138)
Independen a iable
Bi −0.0406 −0.0890 −0.0962 −0.223*** −0.304*** −0.347*** −0.00858 0.0173 −0.0207
(0.0698) (0.0733) (0.0741) (0.0790) (0.0811) (0.0756) (0.0864) (0.0920) (0.0887)
Bio 0.144* 0.134* 0.239*** 0.179** −0.0768 −0.130
(0.0739) (0.0752) (0.0818) (0.0767) (0.0927) (0.0901)
in e ac i e e m
Bio*Bi 0.0533 0.315*** 0.279***
(0.0706) (0.0720) (0.0845)
Cons an 0.00493 0.00388 0.00495 −0.0106 0.00899 0.00320 0.00498 −0.0870 −0.00742 −0.00765 −0.00822 −0.0899
(0.0628) (0.0630) (0.0622) (0.0656) (0.0735) (0.0712) (0.0688) (0.0670) (0.0775) (0.0779) (0.0781) (0.0786)
Model F 26.69*** 22.16*** 20.04*** 17.53*** 13.67*** 13.47*** 13.59*** 16.33*** 10.11*** 8.35*** 7.23*** 8.29***
R20.555 0.556 0.572 0.574 0.390 0.433 0.475 0.557 0.321 0.321 0.325 0.389
R2-change 0.555 0.001 0.015 0.002 0.390 0.043 0.043 0.081 0.321 0.000 0.004 0.064
F-change 26.69 0.338 3.783 0.570 13.67 8.002 8.557 19.092 10.11 0.010 0.686 10.921
Sig. F-change (p- alue) 0.000 0.562 0.054 0.452 0.000 0.006 0.004 0.000 0.000 0.921 0.409 0.001
N113 113 113 113 113 113 113 113 113 113 113 113
no es: *, **, *** s a is ically signi ican a 10, 5, and 1 pe cen le els, espec i ely. s anda d e o s clus e ed a he bank le el a e in b acke s.
cogen Business & MAnAgeMen 21
Fu he mo e, he esul s demons a e a signi ican posi i e impac o he in e ac i e e m Bio*Bi on
he link be ween Bi and bo h oe and Q. howe e , he posi i e in luence o Bio*Bi on Bi- oA link is
no signi ican . hese indings indica e ha bank sha es owned by independen di ec o s posi i ely a ec
he nega i e co ela ion be ween Bi and bank inancial and ma ke pe o mance. his emphasizes he
c ucial ole o owne ship s uc u e, no ably owne ship by independen di ec o s in shaping he dynamics
o Bi and hei subsequen impac on pe o mance.
he esul s o he con ol a iables almos align wi h he heo e ical pe spec i es and indings om
p io empi ical esea ch, enhancing he obus ness o he s udy’s heo e ical unde pinnings.
one no able limi a ion o his s udy lies in i s ela i ely cons ained sample size, encompassing he
en i e y o 12 lis ed banks in saudi A abia om 2009 o 2018. he e o e, his s udy pe o ms a ious
s a is ical echniques, including ols, Fgls, pcse, andom-e ec s, ixed-e ec s, 2sls, and gMM o sub-
s an ia e s udy hypo heses, ensu e obus ness o esul s, and con ol o po en ial endogenei y issues.
Despi e he obse a ions a e enough o es ima ion pu poses and ex ensi e obus analysis has been
done, in e ences om esul s should be made wi h cau ion.
Fu u e inqui ies could enhance he obus ness o he da ase by inco po a ing unlis ed saudi banks
o ex ending he analysis o include lis ed banks ac oss gcc coun ies gi en he analogous owne ship
s uc u es and ins i u ional amewo ks in hese egions.
second, while his s udy illumina es he mode a ing ole o sha es owned by independen di ec o s
in he link be ween hei independence and bank pe o mance, u u e esea ch migh explo e addi ional
mode a ing and media ing a iables, such as di e se owne ship ypes; ceo/chai pe son cha ac e is ics;
and boa d educa ion, expe ience, and di e si y. hi d, despi e implemen ing emedies o add ess a ious
endogenei y conce ns, i is c ucial o ecognize ha hese measu es may only comp ehensi ely mi iga e
some ace s o endogenei y, po en ially impac ing he s udy ou comes.
6. Con ibu ions/implica ions
his s udy adds aluable insigh s in o he exis ing li e a u e and p o ides signi ican implica ions by
del ing in o he nuanced ac o s ha may explain he inconsis en indings obse ed in p io esea ch
ega ding he co ela ion be ween Bi and Fp. no ably, he mode a ing ole o Bio is a c i ical de e minan
o his associa ion. his s udy b oadens he scope o scan in es iga ions in o he ac o s shaping he
di ec link be ween cg mechanisms and Fp. he unique ocus on saudi A abia is no ewo hy, making his
s udy a pionee ing endea o o add ess hese c i ical issues in his business con ex .
he s udy’s con ibu ions and implica ions can be summa ized as ollows. Fi s , while he nega i e
impac o Bi on bank pe o mance con adic s he agency heo y pe spec i e, i lends suppo o he
s ewa dship and ins i u ional heo ies ha conside independen boa d membe s o be less expe ienced
and compe en as ou side s han inside manage s, and ha hei p esence may only be o egula o y
conside a ions. Mo eo e , he obse ed weak ole o Bi may e lec he nega i e e ec o he en enchmen
hypo hesis in he saudi con ex whe e saudi con olling sha eholde s and hei ep esen a i es con ol he
boa d composi ion, and hey may seek o weaken i s e ec i eness o be e se e hei own in e es s.
hese esul s may shed ligh on he e ec i eness o saudi cg mechanisms, especially independen
boa d membe s, as an impo an go e nance ool o moni o and di ec managemen owa ds be e
pe o mance and highe p o ec ion o he igh s o all s akeholde s, no ably mino i y sha eholde s.
Despi e high compliance o saudi lis ed banks wi h saudi cg equi emen s ega ding he ep esen a ion
o independen membe s on he boa d, hey nega i ely a ec he bank pe o mance. Acco dingly, hese
indings would be o in e es o he saudi egula o y au ho i ies and ma ke pa icipan s o assess he
e ec i eness o cu en go e nance mechanisms and iden i y he necessa y e o ms o s eng hen Bi and
limi he excessi e in luence o con olling sha eholde s on company boa ds.
second, he posi i e in luence o Bio on bank pe o mance en iches he li e a u e by p o iding empi -
ical e idence abou he signi ican ole o Bio on Fp, which a ac ed li le a en ion by p e ious esea ch.
Mo eo e , he esul suppo s he con e gence o in e es s e ec in he saudi con ex when independen
di ec o s own sha es in he bank. saudi egula o y bodies and co po a e decision-make s can explo e
a ious s a egies o achie e he con e gence o in e es s hypo hesis, wi h one such app oach being he
manipula ion o di ec o s’ owne ship h ough con ingen paymen s, such as s ock op ions.
22 o. s. hAB oo e Al.
hi d, he s udy con ibu es o he li e a u e by using he con e gence o in e es s hypo hesis o
examine he mode a ing e ec o Bio on he associa ion be ween hei independence and saudi bank
pe o mance. he esul s show a posi i e impac o Bio on he ela ionship be ween Bi and Fp, which
sugges s ha Bi would be e icien when he con e gence o in e es s be ween independen boa d
membe s and o he sha eholde s is engaged. his is an in e es ing ou come con i ming he signi icance
o Bio as an impo an go e nance mechanism a ec ing Bi and Fp. his ou come may p o ide saudi
egula o s, companies, and ma ke pa icipan s wi h new insigh s o unde s and and e alua e he dual
oles and con lic ing e ec s o owne ship on cg mechanisms and Fp.
in sum, hese indings highligh he impo ance o conside ing no only he independence o
boa d membe s bu also hei owne ship s ake in he company. he wo go e nance mechanisms can
come oge he o c ea e a deepe impac on boa d e ec i eness in moni o ing he ac ions o he
con olling owne s and hei ep esen a i es in co po a e managemen s and boa d, in a way ha
ensu es he p o ec ion o he igh s o all sha eholde s. he esul s o his s udy would be o in e es
o egula o y bodies, companies, sha eholde s, and in es o s in saudi A abia and coun ies cha ac e -
ized by concen a ion o owne ship and su e om he excessi e in luence o con olling sha ehold-
e s and en enched manage s on cg e ec i eness, especially he boa d o di ec o s and i s
independence.
Au ho s’ con ibu ions
concep ualiza ion, ome hab oo ; me hodology, ome hab oo and osama Alowaime ; so wa e, ome hab oo ; al-
ida ion, ome hab oo , osama Alowaime , and sami Waked; analysis and in e p e a ion o he da a, ome hab oo ,
osama Alowaime , sami Waked, and ayed Alobaid; d a ing he wo k and e iewing i c i ically o impo an in el-
lec ual con en , ome hab oo , osama Alowaime , sami Waked, and ayed Alobaid; unding acquisi ion, ome
hab oo and osama Alowaime . All au ho s ha e ead and ag eed o he published e sion o he manusc ip . All
au ho s ag ee o be accoun able o all aspec s o he wo k.
Disclosu e s a emen
he au ho s epo he e a e no compe ing in e es s o decla e.
Acknowledgmen
he au ho s g a e ully acknowledge he app o al and he suppo o his esea ch s udy by he g an no.
Apc -2023-12-2011 om he Deanship o scien i ic esea ch a no he n Bo de uni e si y, A a , K.s.A.
Abou he au ho s
Ome Saeed Hab oo is an Associa e p o esso o Accoun ing and he coo dina o o he Depa men o
Adminis a i e sciences, Applied college in a ha, no he n Bo de uni e si y, saudi A abia. he ea ned his ph.D.
in Accoun ing om uni e si y Malaysia e engganu (uM ), Malaysia. his esea ch in e es s include inancial
accoun ing, audi ing, co po a e isk disclosu e, owne ship s uc u e, co po a e go e nance, i m pe o mance, and
panel da a analysis.
Osama Hamad Alowaime is an Assis an p o esso o Accoun ing and Finance a no he n Bo de uni e si y. he
holds a phD om new england uni e si y, Aus alia. his esea ch in e es s include inancial accoun ing, audi ing, i m
pe o mance, co po a e social esponsibili y (cs ), owne ship s uc u e, and co po a e go e nance.
Sami Sobhi Waked is an Assis an p o esso Accoun ing and he head o he Depa men o Accoun ing, college o
Business Adminis a ion, no he n Bo de uni e si y. he ea ned his ph.D. in Accoun ing om uni e si y u a a
Malaysia, Malaysia. his esea ch in e es s include inancial accoun ing, co po a e isk disclosu e, owne ship s uc u e,
co po a e go e nance, inance and audi ing.
Rayed Obaid Alobaid is an Assis an p o esso o Accoun ing and he ice-Dean o he ins i u e o esea ch and
consul ing s udies a he uni e si y o hail, saudi A abia. he ea ned his ph.D. in Accoun ing om he uni e si y o
new england, A midale (une), Aus alia. his esea ch ocuses on inancial accoun ing, audi ing, islamic banking, co -
po a e social esponsibili y (cs ), owne ship s uc u e, co po a e go e nance, and i m pe o mance.
cogen Business & MAnAgeMen 23
ORCID
ome saeed hab oo h p://o cid.o g/0000-0002-1632-1701
Da a a ailabili y s a emen
he da a ha suppo he indings o his s udy a e a ailable om he co esponding au ho , ome saeed hab oo ,
upon easonable eques .
Re e ences
Abdallah, A. A. n., & ismail, A. K. (2017). co po a e go e nance p ac ices, owne ship s uc u e, and co po a e pe o -
mance in he gcc coun ies. Jou nal o In e na ional Financial Ma ke s, Ins i u ions and Money, 46, 98–115. h ps://
doi.o g/10.1016/j.in in.2016.08.004
Abdallah, W., goe gen, M., & o’sulli an, n. (2015). endogenei y: how ailu e o co ec o i can cause w ong in e ences and
some emedies. B i ish Jou nal o Managemen , 26(4), 791–804. h ps://doi.o g/10.1111/1467-8551.12113
Ab aham, A. (2013). Fo eign owne ship and bank pe o mance me ics in saudi A abia. In e na ional Jou nal o Islamic
and Middle Eas e n Finance and Managemen , 6(1), 43–50. h ps://doi.o g/10.1108/17538391311310734
Aguinis, h., s u man, M. c., & pie ce, c. A. (2008). compa ison o h ee me a-analy ic p ocedu es o es ima ing mod-
e a ing e ec s o ca ego ical a iables. O ganiza ional Resea ch Me hods, 11(1), 9–34. h ps://doi.
o g/10.1177/1094428106292896
Al nasse , Z. (2020). he e ec o oyal amily membe s on he boa d on i m pe o mance in saudi A abia. Jou nal
o Accoun ing in Eme ging Economies, 10(3), 487–518. h ps://doi.o g/10.1108/JAee-04-2017-0041
Alajmi, A., & Wo hing on, A. c. (2023). co po a e go e nance in Kuwai : Joining he do s be ween egula o y e o m,
o ganisa ional change in boa ds and audi commi ees and i m ma ke and accoun ing pe o mance. Jou nal o
Financial Repo ing and Accoun ing. Ahead-o -p in . h ps://doi.o g/10.1108/JF A-04-2022-0133
Alam i, M. A. (2014). co po a e go e nance and he boa d o di ec o s in saudi-lis ed companies [phD hesis].
uni e si y o Dundee. h ps://www.seman icschola .o g/pape /co po a e-go e nance-and- he-Boa d-o -Di ec o s-in-
Alam i/2190ed8320be3c01 ce255 710999742b 6d0b62
Alanezi, F. s., & Albuloushi, s. s. (2011). Does he exis ence o olun a y audi commi ees eally a ec iF s- equi ed
disclosu e? he Kuwai i e idence. In e na ional Jou nal o Disclosu e and Go e nance, 8(2), 148–173. h ps://doi.
o g/10.1057/jdg.2010.33
Albassam, W. M. (2014). co po a e go e nance, olun a y disclosu e and inancial pe o mance : An empi ical analy-
sis o saudi lis ed i ms using a mixed-me hods esea ch design [phD hesis]. uni e si y o glasgow. h p:// heses.
gla.ac.uk/5280/
Al-Fa ooque, o., Buachoom, W., & sun, l. (2020). Boa d, audi commi ee, owne ship and inancial pe o mance –
eme ging ends om hailand. Paci ic Accoun ing Re iew, 32(1), 54–81. h ps://doi.o g/10.1108/pA -10-2018-0079
Al-Fa yan, M. A. s. (2017). he ela ionship be ween co po a e go e nance mechanisms and he pe o mance o
saudi lis ed i ms. Co po a e Owne ship and Con ol, 14(2), 338–349. h ps://doi.o g/10.22495/coc 14i2c2p7
Al-Fa yan, M. A. s. (2021). he e ec o boa d composi ion and manage ial pay on saudi i m pe o mance. Re iew
o Quan i a i e Finance and Accoun ing, 57(2), 693–758. h ps://doi.o g/10.1007/s11156-021-00959-4
Al-gam h, B., Al-Dhama i, ., Jalan, A., & A sha Jahanshahi, A. (2020). he impac o boa d independence and o eign
owne ship on inancial and social pe o mance o i ms: e idence om he uAe. Jou nal o Applied Accoun ing
Resea ch, 21(2), 201–229. h ps://doi.o g/10.1108/JAA -09-2018-0147
Al-ghamdi, M., & hodes, M. (2015). Family owne ship, co po a e go e nance and pe o mance: e idence om saudi
A abia. In e na ional Jou nal o Economics and Finance, 7(2), 78–89. h ps://doi.o g/10.5539/ije . 7n2p78
Alha hi, M. (2022). De e minan s o inancial pe o mance in he banking sec o : A case s udy o lis ed Kuwai i
banks. Asian Economic and Financial Re iew, 12(7), 537–548. h ps://doi.o g/10.55493/5002. 12i7.4553
Ali, M. A. s., Aly, s. A. s., Abdelazim, s. i., & Me wally, A. B. M. (2024). cash holdings, boa d go e nance cha ac e is ics,
and egyp ian i ms’ pe o mance. Cogen Business & Managemen , 11(1), 2302205. h ps://doi.o g/10.1080/2331197
5.2024.2302205
Al-Jai i, h. A., Al-Qadasi, A. A., & Al- assas, A. h. (2023). Boa d di e si y e ec s on en i onmen al pe o mance and
he mode a ing e ec o boa d independence: e idence om he Asia-paci ic egion. Cogen Business & Managemen ,
10(2), 2210349. h ps://doi.o g/10.1080/23311975.2023.2210349
Al-Jalahma, A. (2022). impac o audi commi ee cha ac e is ics on i m pe o mance: e idence om Bah ain.
P oblems and Pe spec i es in Managemen , 20(1), 247–261. h ps://doi.o g/10.21511/ppm.20(1).2022.21
Allam, B. s. (2018). he impac o boa d cha ac e is ics and owne ship iden i y on agency cos s and i m pe o -
mance: uK e idence. Co po a e Go e nance: The In e na ional Jou nal o Business in Socie y, 18(6), 1147–1176.
h ps://doi.o g/10.1108/cg-09-2016-0184
Almonee , A., & samon a ay, D. p. (2019). co po a e go e nance and i m pe o mance in he saudi banking indus y.
Banks and Bank Sys ems, 14(1), 147–158. h ps://doi.o g/10.21511/bbs.14(1).2019.13
