DATA ANALYSIS AND INTERPRETATION

CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

4.1 introduction

The chapter will present the analysis and findings from the research conducted. The study established the financial performance of banks due to the effect of corporate governance. The study period covered in the study was from the year 2016-2019.

4.2 Descriptive statistics

The impact of corporate governance on banks’ financial performance, which are listed under the FTSE 100 companies index on the London Stock exchange and whose annual reports are published on data sources, is extensively explained in this section. The test for various variables using ANOVA from the banks identified variables are board size, board independence, BGD, and CEO duality.

Table 4.1 Descriptive statistics

The above secondary data was obtained from the financial statements and their report from 2016 to 2019  of banks listed under the FTSE 100 companies index on the London stock exchange. The data collected was the return on asset calculated as percentage income returned of the total asset. The return on equity was also calculated as the net income returned in the capital employed percentage. Board size was quantified to the total number of directors of the indicated banks; the percentage of women on board in banks identified the BGD i.e., gender diversity, the total number of non-executive directors, identified the board independence. Simultaneously, CEO Duality was the dummy variable since, in some banks, the CEO and the chairperson might be one person.

4.3 Impact of  Board size, Board Independence, Board Gender Diversity, and CEO Duality on ROA.

4.4.1 Pearson Correlation Analysis

Pearson correlation analysis was conducted evaluated to state the linear association between the variables of research. The model determines the strength of the association of variables to the financial performance of the banks.

Table 4.2: Correlation matrix ROA

The result obtained in the table above are as follows: the correlation between ROA and the board size is relatively positive since a correlation 0f 0.08268 is identified after the correlation was determined, there is a negative correlation between ROA and Board independence since a figure   -0.951 was obtained which explains a robust negative correlation, Board Gender Diversity indicated a positive impact on the ROA since a correlation of +0.6024 was determined, and CEO duality negatively affect the ROA, since it showed a negative correlation of  -0.32462 hence Implying a poor relation between CEO duality and ROA of banks listed under the FTSE 100 companies index on the London stock exchange.

The result supports the finding of  (Chopra 2007), which stated that if the board is more diversified, it will lead to the financial institutions and entities’ poor performance. Also, the board size is broadly diversified, leading to the poor performance of banks listed under the FTSE 100 companies index on the London stock exchange.

Table 4.3: Correlation matrix ROE