The financial system consists without hesitation one of the most important determinants of the national economies worldwide. The changes and challenges that the financial institutions face have a great impact on the economic growth of a country as well as in the configuration of the economic environment of each market. A healthy marketplace needs a stable financial system in order to transfer capitals from the “surplus economies to the deficits ones” and funds to be invested in the productive process. No doubt, the banking sector is the focal source of stability and economic growth. A healthy and efficient financial system is crucial for the economic growth of the economy since it deploys effectively the funds in the economic system.
The present research investigates the effect of internal corporate governance (CG) mechanisms such as, board structure, shareholders equity and audit function as well as other variables such as market capitalization, total assets, roa and bank age on banks financial performance. The sample comprises of 108 worldwide banks for the period of pre-crisis period and in deep economic crisis from 2005 to 2010. Regression analysis is utilized to test the aforementioned effects. The results of this research suggest that there is a statistically significant relationship between banks’ profitability and corporate governance.
Keywords: Corporate Governance, bank profitability, pre-after crisis period, board structure.