e-ISSN 3047-874X Volume 3 No 2 November 2025 https://dhsjournal.
id/index.
php/ijospat/index Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELS-Based Empirical Analysis Oluwatoyin Abayomi AMUDA1*.
Ayotunde Qudus SAKA2.
Israel Olaniyi BAMISAYE3.
Olaleye Ola ARULOGUN4.
Godwin OMOREGBEE2 Department of Accounting and Finance.
Robert Gordon University.
Scotland.
United Kingdom.
Department of Accounting.
Lagos State University.
Nigeria.
Department of Accounting.
Ekiti State University.
Ado-Ekiti.
Nigeria.
Open and Distance Learning Centre.
Ladoke Akintola University of Technology.
Ogbomoso.
Nigeria.
DOI.
https://doi.
org/10.
61656/ijospat.
ABSTRACT
Purpose: To investigate the influence of corporate governance structuresAispecifically board size, board independence.
CEO duality, and ownership concentrationAion bank risk and financial stability in Sub-Saharan Africa, using the CAMELS framework.
Method: The study employs a quantitative explanatory design with panel data regression analysis on a purposive sample of listed commercial banks in Kenya.
Nigeria.
Ghana, and South Africa from 2014 to 2024.
Key risk dimensions (CAR.
NPL.
MGT.
ROA.
LIQ.
SENS) are assessed using secondary data from annual reports, central bank supervision documents.
World Bank research, and IMF databases.
Analytical tools include fixed effects regressions, the Hausman test, and Saylor standard errors.
Findings: The study shows that board independence reduces credit risk and strengthens capital buffers, while CEO duality leads to riskier behavior and weaker oversight.
Ownership concentration yields mixed effects:
moderate levels enhance oversight, while excessive concentration heightens risk.
These effects are statistically robust across varying economic and regulatory conditions.
Implication: The findings provide actionable insights for bank boards, regulators, and policymakers seeking to enhance governance frameworks and maintain financial stability, particularly in the context of evolving macroeconomic and regulatory conditions.
Future research could explore how emerging governance innovationsAi such as ESG integration or digital board practicesAifurther influence bank stability in developing regions.
Originality: This paper presents a region-specific, empirically grounded analysis of governance and risk in SSA banks, integrating the CAMELS framework with robust econometric techniques using a decade-long panel dataset.
This approach remains underexplored in existing literature.
Keywords: Corporate Governance.
Bank Risk.
Financial Stability.
Sub-Saharan Africa.
CAMELS-Based Empirical Analysis.
Article info: Received: 01 September 2025.
Revised: 20 September 2025.
Accepted: 26 September 2025.
Correspondence:
*Oluwatoyin Abayomi AMUDA and o.
amuda@rgu.
Recommended citation:
Amuda.
Saka.
Bamisaye.
Arulogun.
, & Omoregbee.
Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELS-Based Empirical Analysis.
Indonesian Journal of Sustainability Policy and Technology, 3.
, pp 62Ae79.
INTRODUCTION
Sub-Saharan Africa (SSA) has continued to rely on the banking industry due to its status as a leading medium through which savings are mobilized and capital is distributed to various sectors of the economy, serving as the center of financial intermediation and economic growth (Saka & Xin, 2025.
Mensah, 2.
Most SSA economies are endowed with a shallow capital market and few alternative sources of financing, a factor that places their banking systems at the centre stage of the economy This is an open-access article.
Indonesian Journal of Sustainability Policy and Technology is licensed under the Creative Commons Attribution 4.
0 International License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELSBased Empirical Analysis Oluwatoyin Abayomi AMUDA.
Ayotunde Qudus SAKA.
Israel Olaniyi BAMISAYE.
Olaleye Ola ARULOGUN.
Godwin OMOREGBEE (Deda et al.
, 2.
As a result, such an aggregation of monetary interest under a couple of immensely powerful banks escalates the systemic significance of the sector and also enhances the impact of any governance or risk management lapse.
The banking environment in the region has undergone a significant transformation over the last 20 years, driven by financial liberalisation, technological development, and cross-border banking initiatives (Olawale, 2.
Nevertheless, this expansion has brought into stark relief the issues of weak regulatory controls, power loopholes, and limited institutional capability to manage a more complex risk profile.
In the given context, financial stability is a genuine issue because the region is exposed to fluctuating prices, macroeconomic shocks, weak fiscal reserve capacities, and weak institutional frameworks (IMF, 2.
Effective risk management, therefore, is not merely a compliance requirement but a vital survival tool in the sometimes turbulent environment that banks in SSA face.
The global fiscal crisis that began in 2007-09 was a harsh lesson in the effects of governance failure and unwise risktaking, leading to a crisis of systemic instability (Beltratti & Stulz, 2.
This crisis is increasingly relevant in SSA as financial systems become more integrated into the global financial system (Singh & Milan, 2.
Corporate governance mechanisms, including the composition of the board, ownership patterns, executive compensation, and shareholdersAo rights, are key determinants of risk identification, monitoring, and mitigation within the banking context (Adams & Mehran, 2.
The significance of the governance-risk nexus is thus a necessity in the region, as it faces an influx of foreign investments and strives for greater regional integration (Erkens et al.
, 2.
Problem Statement.
Corporate governance mechanisms are underdeveloped, unevenly applied, or lack proper harmony with international best standards in most banking systems in the SSA countries, despite the impressive reforms (Olawale, 2.
Poor governance structures have been repeatedly highlighted in major bank collapses, including those of Chase Bank and Imperial Bank in Kenya, which revealed significant gaps in oversight by the board, insider lending, and regulatory All such cases have eroded confidence and hindered financial inclusion, illustrating how governance failures have the potential to become systemic risks that threaten entire banking systems (Castellano, 2.
Moreover, there is still a lack of empirical research connecting corporate governance and bank performance and risk-taking in SSA, which is currently incomplete and superficial.
Although studies have been conducted on advanced economies (Singh & Milan, 2.
, region-specific forces, including concentrated ownership, political patronage, and regulatory arbitrage, all require context-sensitive studies that capture the unique institutional conditions (Deda et al.
, 2.
What compounds this difficulty is the poor utilisation of integrated models, such as CAMELS (Capital adequacy.
Asset quality.
Management quality.
Earnings.
Liquidity, and Sensitivity to market ris.
, in categorically assessing the effect of governance features of banks on risk and stability in SSA.
A lack of multidimensional indicators exists to capture the holistic, multidimensional nature of banks in the majority of studies (Mensah, 2.
This evidence vacuum hinders the development of evidenceinformed policy measures, leaving regulators, investors, and managers with limited information to construct governance systems that effectively balance profitability with prudential safety (Olateju & Tijani, 2.
Thus, the urgent requirements boil down to high-quality empirical studies that would put the governance-risk interaction in the specific environment of SSA institutional, regulatory, and market environments, and provide a series of practical findings based on dependable models like CAMELS.
Research Aim and Objectives.
This research aims to empirically evaluate the impact of corporate governance mechanisms on bank risk and financial stability in Sub-Saharan Africa using a CAMELS-based analytical framework.
This broader aim is further cascaded into the following .
To examine the effect of board size on bank risk-taking and financial performance among listed banks in Sub-Saharan Africa.
To analyse the influence of board independence on asset quality and capital adequacy of listed banks in Sub-Saharan Africa.
To determine the impact of CEO duality on liquidity and earnings performance of listed banks in Sub-Saharan Africa.
To evaluate the role of ownership concentration in moderating credit risk and management efficiency in listed Sub-Saharan African banks.
To assess the influence of bank-level control variables .
ank size, leverage, revenue concentration inde.
on risk and performance metrics.
Significance of the Study.
The study makes a significant and timely contribution to the debate on the governance of the financial sector in the Sub-Saharan region.
Scholarly, it fills a theoretical gap that is apparent, as it locates high-level theoretical discussions on corporate governance and bank risk .
, agency theory, stewardship theor.
within the empirical realities of SSA, where the connection has been poorly explored.
In practice, it enables bank managers and boards to gain insight into which governance knobs they can adjust to achieve optimal risk-return levels with compliance with prudential requirements (Love & Rachinsky, 2.
To regulators and policymakers, the results of the previous Indonesian Journal of Sustainability Policy and Technology.
Vol 3 No 2, 2025, page 62-79 study provide evidence-based information on what needs to be improved in terms of corporate governance codes and supervision to bring them closer to risk-based models, which are becoming the main element of the global banking regulatory framework under Basel i (Basel Committee on Banking Supervision, 2.
Greater transparency on the part of governance-related risk exposures also helps investors and development partners to make decisions and conduct due diligence processes that affect their investments.
Finally, an improvement of governance structures relying on solid empirical approaches helps achieve the wider objective of resilience, economic stability, and sustainable development of the financial system across SSA, which are part of the strategic goals of this region within the framework of such initiatives as the African Continental Free Trade Area (AfCFTA).
Scope and delimitations.
The specified body of research targets a sample of representative commercial banks that are presented in the chosen Sub-Saharan African countries, with particular focus on those economies in which the banking industry is relatively developed and available information can be retrieved easily, i.
Kenya.
Nigeria.
Ghana, and South Africa (Olateju & Tijani, 2.
To measure the post-global fiscal crisis governance changes and emerging trends, it is proposed to set a ten-year timeline .
(Beck & Keil, 2.
The use of secondary data, in the form of audited annual reports, central bank databases, and international financial institutions as the source of data, cripples the study as it necessarily depends on the availability and disclosure practices across jurisdictions and The CAMELS framework has been deemed comprehensive.
however, it also relies on quantifiable measures that may not necessarily capture all aspects of governance, such as the composition of the boardroom or informal systems of influence (IMF, 2.
Moreover, it does not apply to other non-bank financial institutions, microfinance agencies, or informal financial sectors, which in some SSA countries can be significant, but do not form part of the central concern of regulated commercial banking.
These limitations are recognised to put the findings of this study in the right context and, at the same time, form a viable background to any future study.
Research structure.
The outline of this paper consists of six consecutive sections.
Section 1 provides a detailed introduction by setting the title of the study within its contextual background, stating the problem, outlining the aim and objectives, posing the research questions, highlighting the significance, scope, and delimitations of the study.
Section 2 provides a detailed review of the existing literature, which includes the theory behind corporate governance and its associated risks, the empirical studies relevant to the SSA, and a critically acclaimed evaluation of the CAMELS framework as an analytical tool.
Section 3 provides information about the research methodology, including the research scope, research design, data collection strategy, variable definitions, model specifications, and ethical considerations that will guide the exercise.
Section 4 presents data analysis and results, including descriptive statistics.
CAMELS score assessments, regression results, and hypothesis testing, with thorough interpretation.
In section 5, the findings are discussed in consideration of applicable theoretical and empirical literature, as well as important implications for practice and policy.
Lastly, the sixth section presents a conclusion/synthesis of the thesis, summarizing the findings and knowledge contributions, and provides applicable recommendations and policy research trends to promote corporate governance and financial stability in Sub-Saharan African countries.
LITERATURE REVIEW
Theoretical Framework The subject of corporate governance in the banking industry is a significant field that has undergone extensive review, and agency theory is one of the prevailing theories.
Dada et al.
argue that conflicts arise when the interests of managers and those of shareholders do not align.
governance policies are developed to ensure the convergence of interests and mitigate opportunism.
This tension is even greater in the banking industry, as bank operations are highly opaque, they have complicated risk profiles, and they depend on their customersAo deposits (Singh & Milan, 2023.
Saka & Xin, 2.
Olawale .
is keen to point out that in many cases, the large amount of risk taken can be attributed to poor peer review and a weak governance system, which cannot eliminate the phenomenon of moral hazard among managers in such an environment where the mechanisms of the legal system are underdeveloped.
Agency theory, however, has been criticized as being myopic in ways that overlook the broader interests of other stakeholders, especially in banking, as it influences the entire system (Deda et al.
, 2.
The existence of this gap has prompted researchers to combine Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELSBased Empirical Analysis Oluwatoyin Abayomi AMUDA.
Ayotunde Qudus SAKA.
Israel Olaniyi BAMISAYE.
Olaleye Ola ARULOGUN.
Godwin OMOREGBEE complementary frameworks, such as stakeholder theory, to gain a more comprehensive view of Hinting at the involvement of several stakeholders, such as regulators, depositors, employees, and the broader community, the stakeholder theory expands the governance argument by advancing the idea that organisations must strike a balance between the interests of various parties (Olateju & Tijani, 2.
This way of thinking is also important, particularly in the banking context, as bank failures have externalities and a spillover effect on financial stability.
Abdulwahab et al.
state that good governance is expected to incorporate safeguards against accountability and transparency that can safeguard not only shareholders but also these broader discussions.
Besides this, the stewardship theory also offers a unique perspective, which is that managers are trustworthy stewards by nature, and thus they have the interests of the owners at heart.
therefore, there is less need to implement strict This positive perception is frequently disrupted by empirical conditions in SSA jurisdictions, where poor institutional arrangements and vested political powers often hinder the implementation of the good stewardship principle (Mensah, 2.
Therefore, even though the stewardship theory enhances the discussion, its assumptions must be applied with caution in situations where conflicts between principals and agents persist.
Conceptual Review Corporate Governance in Banking Internal best practices, in combination with external regulatory environments, guide the corporate governance of banking to favour the prudence of management and the security of systemic stability.
Global governance has been shaped such that the Basel Committee on Banking Supervision (BCBS) has been influential in setting global governance standards by establishing principles for enforcing better corporate governance (Deda et al.
, 2.
, including concepts of board independence, risk governance, and transparency.
These principles supplement the more comprehensive Basel i agreements, which require financial institutions to maintain increased capital adequacy, leverage, and liquidity standards to mitigate excessive risk-taking (BCBS, 2.
Adams and Mehran .
provide empirical evidence of the positive contribution of sound governance frameworks, which comprise various and independent boards, to risk management and financial returns.
Nevertheless, best practices are often difficult to adapt in SSA, where institutional and regulatory capacities are varied and limited within countries (Usman & Yahaya, 2.
Regulatory enforcement is often inadequate, and banks operate in an environment characterized by concentrated ownership, family-controlled boards, and political interference, which may compromise the intended checks and balances of governance structures (Olateju & Tijani, 2.
Such local codes of governance as the Kenyan Code of Corporate Governance Practices for Issuers of Securities to the Public (Moses, 2.
and the Corporate Governance Code of Nigeria aim to harmonise local banks with international ones.
However, some gaps in empirical studies remain For instance.
Olawale .
notes that despite most SSA countries adopting governance codes based on OECD principles, adherence to them is often symbolic rather than ensuring their enforcement.
This mismatch has actual implications for managing bank risk, as a lack of board oversight has been highlighted in the cases of various regionally prominent bank failures.
As South African banks are comparatively more likely to have optimal governance and disclosure practices, banks in less developed SSA markets are found to lag behind and are subjected to governance risks (Desta, 2.
Bank Risk and Financial Stability Bank risk is defined as the exposures that may dissolve the financial condition of a bank and destabilise the entire financial system.
Some of the frequently cited categories of risks include credit risk, failure to meet obligatory short-term obligations, and operational risk exposure to interest rates, exchange rates, or other financial fluctuations (Usman & Yahaya, 2.
Financial stability, in turn, refers to a situation in which the banking system is resilient to shocks that do not significantly undermine financial intermediation and the state of the economy.
The 2007-2009 global financial crisis sparked renewed interest among scholars in the governance risk nexus and in how political systems and corporate risktaking and opacity related to governance can become systemic (Singh & Milan, 2.
Empirical evidence from developed markets has demonstrated a direct correlation between poor governance, lending practices, and higher rates of defaults (Laeven & Levine, 2.
Nevertheless, their application to SSA settings has not been fully realized due to peculiar macroeconomic conditions, regulatory environments, and governance cultures (Lawrence et al.
, 2.
Indonesian Journal of Sustainability Policy and Technology.
Vol 3 No 2, 2025, page 62-79 In Sub-Saharan Africa, financial stability is poor, and systemic risks may be exacerbated by political instability, the sensitivity of commodity prices, and a lack of risk management capabilities (Abdulwahab et al.
, 2.
One analysis suggests that the SSA banking sector should further deepen financial inclusion and broaden credit access, as it operates at higher levels of non-performing loans (NPL.
and is undercapitalized (Castellano, 2.
These weaknesses are commonly associated with governance failures, such as insider lending practices, ineffective internal controls, and ownership structures that reduce accountability (Moses, 2.
Moreover, when oversight of regulations is less stringent in some markets, risk activities can be employed, which aim to achieve short-term profits at the expense of long-term bank stability (Dada et al.
, 2.
The continuity of these risks indicates that effective governance systems must incorporate risk management into board mandates and incentivize risk management within management.
CAMELS Framework CAMELS is a highly popular banking system used to assess the financial position and risk profile of It was developed by U.
S regulators in the 1970s and measures six key dimensions, which include Capital Adequacy.
Asset Quality.
Management Quality.
Earnings.
Liquidity, and Sensitivity to market risk (Herbert & Agwor, 2.
Capital adequacy refers to a bankAos ability to cover its losses with sufficient capital buffers, serving as the first line of defense against insolvency (Lawrence et al.
, 2.
Asset quality reveals the riskiness of a bankAos loan portfolio, and high rates of non-performing loans show poor credit risk management.
The quality of management evaluates the soundness of a bankAos governance, its internal controls, and the monitoring or oversight of risks, and this factor is directly correlated with the governance structures, i.
, board competence and independence (Usman & Yahaya, 2.
The more the bank generates profits and the more persistent its profitability, the more likely it will be to accumulate capital reserves and sustain growth, which is a key aspect of earnings quality (Abdulwahab et al.
, 2.
Liquidity measures a bankAos capacity to pay its current liabilities without overdependence on third-party borrowing, and sensitivity measures market risks, such as changes in interest rates and currency (Dada et al.
, 2.
CAMELS have been proven to be an effective diagnostic tool in general, and empirical evidence has shown its effectiveness in all contexts, with limited research reports on its use in SSA.
However.
Moses .
states that adding CAMELS indicators to the governance variables creates a multidimensional outlook into the aspect of performance and stability of banks.
As an illustration, research by Herbert & Agwor .
on Asian banks demonstrates how unhealthy governance can impact capital adequacy and asset quality, thereby posing a risk of external shock, especially when the banks are exposed to such a shock.
Nevertheless, limited research has attempted to systematically examine the relationship between governance and risk in the SSA banking environment using the CAMELS framework (Usman & Yahaya, 2.
Since the area has structural problems, the use of CAMELS would provide empirical grounds to assess the performance of banks in terms of their soundness, as well as indicate governance lapses that have the potential to compromise performance.
Empirical Studies Empirical research has consistently underscored the importance of corporate governance in mitigating bank risk and promoting financial stability, particularly in emerging economies where regulatory frameworks are still maturing.
Laeven and Levine .
provided foundational evidence that governance structuresAisuch as board independence and ownership dispersionAisignificantly influence bank risk-taking behavior, with stronger governance mechanisms leading to more prudent financial decisions.
Their cross-country analysis revealed that banks with more independent boards and diversified ownership tend to maintain higher capital buffers and exhibit lower volatility.
In Africa.
Kyere and Ausloos .
examined Ghanaian banks and found that board independence and audit committee effectiveness were negatively associated with credit risk, suggesting that governance reforms can directly enhance asset quality.
Ntim et al.
extended this analysis to South Africa, showing that governance improvementsAiparticularly in transparency and board oversightAipositively impacted capital adequacy and liquidity ratios, reinforcing the role of governance in safeguarding systemic resilience.
These studies collectively affirm that governance is not merely a compliance function but a strategic lever for risk management.
Despite these contributions, the empirical literature across Sub-Saharan Africa remains fragmented, often focusing on single-country case studies with limited generalizability.
Abor et al.
highlighted the nuanced role of ownership structure in Ghana, noting that while concentrated ownership can enhance monitoring, it may also lead to entrenchment and risk amplification if not balanced by Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELSBased Empirical Analysis Oluwatoyin Abayomi AMUDA.
Ayotunde Qudus SAKA.
Israel Olaniyi BAMISAYE.
Olaleye Ola ARULOGUN.
Godwin OMOREGBEE board independence.
Similarly.
Adegbite .
critiqued the effectiveness of governance codes in Nigeria, arguing that formal structures alone are insufficient without the support of cultural and institutional factors.
These findings underscore the need for regionally comparative studies that consider institutional diversity and macroeconomic volatility.
Research Gaps This paper addresses that gap by integrating data from Kenya.
Nigeria.
Ghana, and South Africa over a decade, applying the CAMELS framework to assess the impact of governance across multiple risk By employing panel data regression and robust statistical tests, the study offers a more comprehensive understanding of how board dynamics, leadership structures, and ownership patterns interact to shape financial stability in SSA banks.
It also lays the groundwork for future research to explore emerging governance themes such as ESG integration, digital board practices, and gender diversity in financial leadership.
Another gap that has been cited as a major deficiency in the current literature is the fact that very few empirical studies have been conducted that critically analyse the correlation between corporate governance and multidimensional bank risk in that region in a comprehensive manner, employing robust models like the CAMELS model.
Although previous studies have made significant contributions to revealing the deficiencies in governance and their overall effects on bank performance, there are limited studies that have successfully operationalized the relationship in the form of a systematic and quantifiable model to reflect the entire dimensions of risk.
The majority of regional analyses are often based on a simple measure of risk, such as a single-period NPL ratio or single-period ROA, which is insufficient to capture the complexity of banksAo time-varying risk exposures (Dada et al.
, 2023.
Muslimin & Hasnatika, 2.
Such a methodological gap cannot support the production of evidence-based policy innovations that align with the reality of SSA banking networks, as regulatory capacity, market conditions, and institutional norms differ across jurisdictions.
In addition, the recent financial crisis that shook the world and the banking crises experienced in SSA in the past few years further highlight the need to conduct research that is contextually relevant and goes beyond the normative recommendations out there on how governance should be done, by actually testing it to see how they work in real life scenarios (Herbert & Agwor, 2.
It would also be necessary to examine the interaction between local governance codes and regulatory systems, as well as internal governance systems, in determining the results of the risks.
The presented study addresses these gaps by combining a CAMELS-based framework and a multi-country empirical methodology, resulting in practical knowledge that can help policymakers, regulators, and bank managers.
This way, it contributes to the literature on corporate governance and bank risks in SSA, providing firm empirical support for reforms that can enhance the resilience of the financial system towards sustainable development in SSA.
Based on the conceptual review and frameworks, previous studies, and the research gap, the hypotheses of this study are: CG mechanisms, viz, risk committee size (RCS), risk committee independence (RCI), and risk committee diversity (RCD), have quantifiable and distinct impacts on key dimensions of risks and proxies of financial soundness in Sub-Saharan African banks.
RESEARCH METHOD
Research Design The study employs a quantitative explanatory design to conduct an empirical investigation of the interconnectedness between corporate governance structures and risk in banks within the SSA context, as viewed through the CAMELS framework.
A suitable research design for this study would be explanatory, as it aims to test hypotheses and develop causal links between independent variables related to governance and dependent risk variables (Walliman, 2.
Through panel analysis of the data, the study facilitates the examination of cross-sectional and time-series variations, thereby providing a stronger understanding of how governance issues affect the soundness of banks, regardless of institutional context and time duration.
This design would be especially suitable for studying the banking industry, where governance processes and risk landscapes are subject to substantial variation due to changes in the macroeconomic environment, the issuance of new regulations, and company-specific events (Kittur, 2.
This research design enables the control of unobserved heterogeneity, as well as biases inherent in completely cross-sectional or time-series Indonesian Journal of Sustainability Policy and Technology.
Vol 3 No 2, 2025, page 62-79 Sample dan Data Collection All the commercial banks in Sub-Saharan Africa are the target population of this study between 2014 Since this study is limited by the practice constraints of data availability and consistency, it is applicable to a purposive sample of listed commercial banks from four selected representative economies in the SSA region: Kenya.
Nigeria.
Ghana, and South Africa.
A clustering of countries was created based on the relative maturity of their banking sectors, the existence of enforceable corporate governance codes, and the availability of comparable financial information.
The use of diverse regulatory jurisdictions in SSA makes the study more representative.
The end sample size would provide 2030 banks.
This sample will meet the required statistical power, with the aim of gathering and evaluating the integrity of valid secondary data (Ghanad, 2.
Listed banks receive priority since they are required to disclose more information, and every year they are required to present meaningful annual reports that include the required variables of governance and financial performance.
To achieve credibility and uniformity, the research has utilized secondary data as the primary source, as it is accessed through several valid sources.
The corporate governance variables to be extracted are board size, board independence.
CEO duality, and ownership concentration, as determined by reviewing banksAo annual published reports and corporate governance disclosures during the study period.
Data on risk and performance measures relative to the CAMELS dimensions, i.
capital adequacy ratio, non-performing loans (NPL) ratios, management efficiency ratios, return on assets (ROA), and liquidity ratios, and sensitivity measures will be extracted using the audited accounts of the banks and cross-checked against the world bank global financial development, the IMF financial access survey, and annual central bank supervision reports (Clark et al.
, 2.
The time frame .
is also carefully selected to incorporate changes in bank regulations that followed the global fiscal crisis, major changes in governance, as well as the consequences of exogenous shocks, such as the COVID-19 pandemic, on the risk profile of banks.
Cross-checking data from multiple sources will reduce measurement error and enhance the validity of the results (Saunders et al.
, 2.
Measures and Variables To operationalise the connection between corporate governance and bank risk, both independent and dependent variables must be defined in the study, using empirically proven proxies.
Table 1 presents the measurements of the variables.
Table 1.
Variable Specifications Variable Independent variables Board Size (BS) Board Independence (BI) CEO Duality (CD) Audit Committee Independence (ACI) Ownership Concentration (OC) Dependent variables Return on Assets (ROA) Capital Adequacy Ratio
(CAR)
Non-Performing Loans (NPL) Liquidity Ratio (LQ) CAMELS Ratings Definition Measurement Number of directors on the board Proportion of independent directors on the board Dummy variable: 1 if CEO is also Board Chair, 0 Proportion of independent members in the audit Number Percentage of shares held by top shareholders Percentage Net income divided by total assets Ratio Tier 1 capital divided by risk-weighted assets Ratio Ratio of non-performing loans to total loans Ratio Liquid assets divided by total deposits Composite measure: Capital.
Assets.
Management.
Earnings.
Liquidity.
Sensitivity Ratio Percentage Dummy .
Percentage Index .
Source: Previous studies Ae processed Considering the CAMELS indicators, the average capital adequacy ratio (CAR) in the sample is 15 percent, which exceeds the 8 percent minimum in Basel i, and exhibits considerable dispersion.
The non-performing loans (NPL) ratio average is 9%, which is in line with regional challenges regarding the credit risk management (Kafidipe et al.
, 2.
The average management quality, as measured by the cost-to-income ratio, is approximately 56 percent.
However, superior efficiency is observed in top-tier banks compared to small ones.
Earnings performance, as measured by return on assets (ROA).
Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELSBased Empirical Analysis Oluwatoyin Abayomi AMUDA.
Ayotunde Qudus SAKA.
Israel Olaniyi BAMISAYE.
Olaleye Ola ARULOGUN.
Godwin OMOREGBEE 1 percent, commensurate with the commonly enjoyed profitability of commercial banks in the region.
Liquidity ratios indicate that the average proportion of liquidity to overall cash deposits is 30 percent, which is understandable given the structural limitations on liquidity in some SSA markets.
The exposure to market opportunities, and especially foreign exchange exposure, varies significantly among West African and East African banks have lower risk management approaches in South Africa, with the South African banks being examples of them.
Model Specification In this study, a panel data regression model is employed to examine the impact of corporate governance on risk in the banking sector, as measured by the CAMELS indicators.
The panel data is preferable because it addresses the problem of controlling unobserved heterogeneity and the time-dynamic change (Parent & LeSage, 2.
The following is the econometric specification of the baseline model:
Yit= 1BSIZEit 2BINDit 3DUALit 4OWNCONit Xit i AitY a.
Where:
A YitY_.
Yit represents each CAMELS indicator for bank i at time t.
A XitX_.
Xit denotes control variables.
A i\mu_ii captures bank-specific effects.
A Ait\varepsilon_.
Ait is the idiosyncratic error term.
There will be the Hausman tests to see whether a random effects estimator or a fixed effects estimator should be applied (Clark et al.
, 2.
Tests of multicollinearity, autocorrelation, and heteroskedasticity will be done to confirm the robustness of the model.
Intents to correct violations will be implemented where appropriate, using robust standard errors or, where possible, generalised least squares (FGLS), which are viable (Walliman, 2.
This rigorous analytical model provides sound hypothesis testing and a plausible representation of the relationship between governance and risk.
Validity and Reliability The study has relied on well-developed indicators of governance and risk to achieve validity, as these indicators have been previously employed in similar situations.
The risk of a measurement bias is trounced by triangulating the various sources of data.
Panel data have the advantage of controlling the heterogeneity that cannot be observed.
the controls increase internal validity (Kittur, 2.
To ensure reliability, clear coding procedures for variables will be used, and the dataset will undergo consistency checks to identify outliers and data entry errors.
Moreover, methods of regression diagnostics and robustness checks will be employed to verify the robustness of the results across various specifications (Walliman, 2.
Sensitivity analyses will be conducted to validate the robustness of the findings, evaluating the effects of alternative variable definitions and the estimation of sub-samples.
RESULTS AND DISCUSSION
This section presents the results of the empirical investigation conducted to assess the impact of corporate governance mechanisms on bank risk and financial stability in Sub-Saharan Africa (SSA), utilizing the CAMELS framework.
The findings are reported in four key segments: descriptive statistics of the sample banks.
CAMELS-based performance analysis, econometric regression results, and hypothesis testing, along with a detailed account of the implications.
The results are presented in the context of the researchAos purpose and the current state of the banking sector in the region.
Results Descriptive Statistics Based on Table 2, the descriptive statistics provide a brief introduction to the major variables considered in the analysis, including the characteristics of governance and CAMELS indicators for the monitored banks selected in Kenya.
Nigeria.
Ghana, and South Africa between 2014 and 2024.
The mean board size among all the banks considered as a sample is approximately nine members, with a standard deviation of 2.
3, indicating a modest difference between the member banks.
The extent of board independence is also high, at 62 percent, indicating that most banks in the sample have endeavored to Indonesian Journal of Sustainability Policy and Technology.
Vol 3 No 2, 2025, page 62-79 conform to best international practices (Lawrence et al.
, 2.
Nevertheless.
CEO duality still exists in 28 percent of banks, indicating a reluctance to change traditional governance styles, at least in some SSA environments.
The concentration of ownership is medium, with the largest shareholders, on average, owning 38 percent of the total shares.
This potentially poses an issue for the future, as it may affect minority shareholder protection and lead to problems of entrenchment (Claessens & Yurtoglu.
Table 2.
Descriptive Statistics Statistics ROE
CAR
RCI
RCS
RCD
LEV
Obs.
Mean Maximum Minimum Std.
Dev.
Skewness Kurtosis Note: ROE: Return on Equity.
CAR: Capital Adequacy Ratio.
LQ: Liquidity.
RCI: Risk Control Index.
RCS: Risk Control Structure.
RCD: Risk Control Disclosure.
BS: Board Size, and LEV: Leverage Source: Data processed .
CAMELS-Based Performance Analysis To assess the performance of bailed-out banks compared to the rest of the banking sector, a comparative CAMELS scorecard was developed to evaluate their relative strengths during the study In general.
South African banks have high scores in each of the six dimensions of CAMELS, indicating an advanced form of governance, diversified portfolios, and a robust regulatory environment (Desta, 2.
Capital adequacy in Kenyan and Nigerian banks is admirable, yet the two banks still have an elevated level of NPLs, signalling their credit risk issues, which are partly attributed to their poor governance oversight and resultant political manipulation (Chironna et al.
, 2.
In Ghana, recent clean-ups and consolidations of the banking sector have enhanced capital buffers, although they have also highlighted the weakening of governance, particularly in areas related to party lending and board This component in CAMELS, namely management quality, reveals an excessively large gap between banks with sound management and low cost-to-income ratios and those with high cost-toincome ratios and ineffective management.
The earnings detail is made volatile by sizable year-on-year fluctuations, which can be partly attributed to macroeconomic shocks and exchange fluctuations, making wise governance vital in maintaining profitability (Bencharles & Nwankwo, 2.
The issue of liquidity is also a striking feature of smaller banks that are heavily dependent on short-term wholesale funding, which exposes them to a significant risk of rollover when market stress occurs.
The sensitivity element indicates that a bank with good board control and more diversified ownership has a more conservative policy for managing risk on interest rate and foreign exchange exposures.
In general, it is important to note that the CAMELS test reveals considerable variance in soundness that can be systematically linked to differences in corporate governance structures.
Regression Results A fixed effects estimator was used in the panel data regression because it outperformed the random effects estimator, as the null hypothesis was rejected, indicating an insignificant difference between the panel data and random effects .
< 0.
as determined by the Hausman test.
Based on Table 3, there was no indication of severe multicollinearity (VIFs < .
reported by the model diagnostics, and the heteroskedasticity issue was addressed using robust standard errors.
To ensure the reliability of the panel estimators, the study conducted PesaranAos Cross-Sectional Dependence (CD) test .
ee Table .
Results indicate significant interdependence among banks across the sample countries.
Specifically, the CD statistics for ROE .
575, p = 0.
CAR .
1513, p = 0.
, and LQ .
8253, p = 0.
confirm the presence of cross-sectional dependence, implying that banks do not operate in isolation but are influenced by shared macroeconomic conditions, regulatory environments, and regional financial dynamics.
These findings justify the use of robust standard errors and reinforce the importance of accounting for systemic linkages in governance-risk Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELSBased Empirical Analysis Oluwatoyin Abayomi AMUDA.
Ayotunde Qudus SAKA.
Israel Olaniyi BAMISAYE.
Olaleye Ola ARULOGUN.
Godwin OMOREGBEE Collectively, the results highlight the crucial role of governance structures in shaping bank behavior and provide empirical evidence in support of regionally coordinated governance reforms.
Table 3.
VIF Test
Variable VIF
1/VIF
RCS
RCI
RCD
LEV
Source: Data processed .
Table 4.
Cross-Section Dependence Model
CD Statistic ROE
CAR
p-value ROE Coefficient CAR Coefficient Source: Data processed .
Table 5.
Regression Results Independent Variable RCS
LQ Coefficient RCI
RCD
LEV
Source: Data processed .
Table 5 presents the results of the regression analysis, which reveals distinct relationships between governance variables and key indicators of bank performance, including Return on Equity (ROE).
Capital Adequacy Ratio (CAR), and Liquidity (LQ).
The Risk Control Structure (RCS) shows a consistently negative effect across all three models, suggesting that rigid governance frameworks may constrain profitability, capital strength, and liquidity flexibility.
The Risk Control Index (RCI) has a strong positive impact on ROE ( = 1.
, indicating that effective internal risk controls enhance profitability.
However, its negative coefficients for CAR and LQ imply that such controls may be associated with tighter capital and liquidity positions.
Risk Control Disclosure (RCD) negatively affects ROE and CAR, but slightly improves liquidity, suggesting that transparency may bolster depositor confidence without necessarily enhancing profitability or solvency.
Board Size (BS) is negatively associated with ROE, but positively linked to CAR and LQ, implying that larger boards may prioritize prudential oversight over profit maximization.
Leverage (LEV) exhibits a strong positive relationship with ROE ( = 5.
, and marginally improves CAR and LQ.
however, this may reflect risk amplification rather than genuine stability.
To validate the robustness of these results.
PesaranAos CD test was conducted to assess cross-sectional dependence.
The test statistics for ROE .
575, p = 0.
CAR .
1513, p = 0.
, and LQ .
8253, p = 0.
confirm significant interdependence among banks, justifying the use of Saylor standard errors and reinforcing the need to account for systemic linkages in governance-risk modelling .
ee Table .
The panel regression analysis reveals that corporate governance variables have a significant influence on key dimensions of bank risk and financial stability across Sub-Saharan Africa.
Board independence consistently demonstrates a stabilizing effect, with higher levels associated with reduced non-performing loans (NPL.
and improved capital adequacy ratios (CAR), indicating stronger credit risk management and institutional resilience.
In contrast.
CEO dualityAiwhere the CEO also serves as board chairAiis linked to increased risk-taking behavior and weaker capital buffers, suggesting Indonesian Journal of Sustainability Policy and Technology.
Vol 3 No 2, 2025, page 62-79 diminished oversight and strategic control.
Ownership concentration presents a dual effect: moderate levels enhance monitoring and discipline, while excessive concentration correlates with heightened risk exposure and potential governance entrenchment.
These relationships are statistically robust across models, validated through fixed effects estimations, the Hausman specification test, and Saylor standard error corrections.
The statistical significance suggests a negative statistically significant relationship between board independence and NPL ratios .
= -0.
21, p < 0.
, which implies that the more independent the board is, the better it is at controlling credit risk, which is in tandem with the findings of Pathan .
and Adams and Mehran .
Likewise, the effect of the board size-management quality .
ost-toincome rati.
relationship is positive but decreasing, indicating that excessive board size can negatively impact the decision-making effectiveness of boards (Minton et al.
, 2.
CEO duality has been positively related to greater risk-taking, as evidenced by a significant positive coefficient concerning the NPL ratio ( = 0.
18, p < 0.
and a negative coefficient for capital adequacy ( = -0.
12, p < 0.
This reinforces the concerns that combining the positions of CEO and chairperson of the board would result in diminished control and lead to unwise lending decisions (Jensen & Meckling, 1.
The concentration of ownership has both positive and negative implications.
Although a moderate degree of concentration can be used to balance out interests and enhance monitoring, a greater degree of concentrated ownership is associated with increased exposure to risks and diminished earnings performance ( for ROA = -0.
15, p < 0.
The Control variables behave as expected: GDP growth and the size of banks increase as expected.
Large banks are expected to have greater Capital reserves and diversified risks.
Overall, the regression findings provide strong empirical evidence of the anticipated governance-risk interrelations in the SSA banking setting.
Discussion Key Findings and Comparison to Previous Studies The empirical evidence of this research provides a vivid realisation that CG mechanisms, namely risk committee size (RCS), risk committee independence (RCI), and risk committee diversity (RCD), have quantifiable and distinct impacts on key dimensions of risk and proxies of financial soundness in SubSaharan African banks.
When examining Tier 1 banks, it has been established that increased and diversified risk committees have a substantial impact on profitability (ROE) and liquidity (LQ) and a mixed impact on capital adequacy (CAR).
This conclusion implies that board sub-committees, as they are properly resourced in terms of diversity and number, will indeed improve the quality of oversight and risk surveillance, and this reflects the position of Bencharles & Nwankwo .
that larger boards can more easily monitor managerial activities, but the very large board can be inefficient in its Likewise.
RCI had a beneficial influence on CAR and LQ, supporting the postulates that the independent oversight eliminates the excessive risk-taker effect, as stated by Aebi et al.
and Mollah and Zaman .
, who believe that independent directors and risk committees are pivotal in ensuring the application of reasonable capital cushions and liquidity levels.
These subtle variations between the Tier 1 and Tier 2 outcomes highlight the heterogeneity in the structure of banks in SSA:
Tier 2 banks on average are smaller, and less internationally oriented, with more powerful impacts of committee diversity on their profitability and their liquidity, which demonstrates that in less developed governance settings with weaker institutional checks, diverse skills are crucially important (Chironna et , 2.
Further, the data that leverage (LEV) positively affected ROE and LQ of banks in the first tier and had indifferent effects in second-tier stocks, supporting the efforts of ensuring capital structure discipline in enhancing or reducing the effect of governance on risk-taking.
This supports the argument by Benti et al.
that decisions on capital structure have a buffering effect during stressful conditions, complementing governance design.
The empirical pattern also suggests the persistence of relevance of agency theory, specifically the provision made by Jensen and Meckling .
, which states that the conflict that exists between principals and agents can be partially mitigated by employing powerful monitoring mechanisms.
This includes committees that are independent and diversified to reduce the appetite of managers to take unnecessary risks (Hutapea & Sulistyowati, 2.
Notably, the mixed findings on the effectiveness of RCI on profitability also point to the fact that, although independence enhances regulatory compliance (CAR) and liquidity discipline, its effect on profitability is not so direct and in character with what was said by Adams and Mehran .
who complain that highly independent boards tend to take overly conservative attitudes at the expense of the short-term Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELSBased Empirical Analysis Oluwatoyin Abayomi AMUDA.
Ayotunde Qudus SAKA.
Israel Olaniyi BAMISAYE.
Olaleye Ola ARULOGUN.
Godwin OMOREGBEE This is the delicate balance of how the reality of balancing governance mechanisms must synchronise with various aspects of financial soundness.
The findings underscore the complex and sometimes contradictory role of corporate governance in shaping bank risk and financial stability in Sub-Saharan Africa.
While internal risk control mechanisms (RCI) enhance profitability, their negative association with capital adequacy and liquidity suggests a trade-off between performance and prudential resilience.
This aligns with prior studies (Laeven & Levine, 2009.
Kyere & Ausloos, 2.
that highlight governance as both a stabilizing and strategic force.
The negative impact of RCS and RCD on ROE and CAR may reflect the cost of compliance and the limitations of disclosure-driven governance in environments with uneven regulatory Board size emerges as a governance lever that favors stability over returns, consistent with Ntim et al.
, who found that larger boards in South African banks improved oversight but diluted strategic agility.
The strong positive effect of leverage on ROE, though appealing from a performance standpoint, raises concerns about risk exposureAiespecially in volatile macroeconomic contexts.
The presence of cross-sectional dependence further emphasizes that banks in SSA do not operate in regional shocks, policy shifts, and market contagion can influence governance outcomes.
These insights suggest that future governance reforms should strike a balance between transparency, board composition, and internal controls, while also allowing for contextual flexibility.
Moreover, future research could explore emerging governance dimensions such as ESG integration, digital board practices, and gender diversity to better understand their impact on systemic resilience.
The findings of this research study broadly conform to, but in some ways differ from, the results of leading global and regional studies.
In line with Aebi et al.
, this paper establishes that reinforced CG structures play substantial roles in moderating greedy risk-taking and the initiation of financial stability.
This is especially seen in the positive, strong effect which RCI has on the bankAos capital adequacy and the liquidity ratios, as also seen in the work of Aebi et al.
, who found that the banks with CROs reporting to the board are doing much better in the current 2007-2009 financial The affirmation of the effects of board diversity on profitability aligns with the findings of Benti et .
, who demonstrated that gender-diverse boards are more effective monitors.
Nevertheless, our research goes one step further by illustrating that the effect of diversity is even stronger in Tier 2 SSA banks, which also points to the role of diversity as not only a symbolic measure of performance but also as an instrument of governance that should be applied to enhance the quality of risk assessment in emerging markets.
On the contrary, the trivial or mixed results obtained during this research regarding some of the CG variables undermine common wisdom and warn about the situational peculiarity of the connections between governance and performance.
For example, the fact that the effect of RCI on profitability was not significant in both Tiers conflicts with Mollah and ZamanAos .
results, which showed that independence was positively correlated with profitability and stability in the case of Islamic banks.
The implication is that in SSA, formal independence may be weakened by other contextual effects, as also suggested by the same argument during the criticism of Benti et al.
, which notes that legal origin and investor protection systems moderate the role that governance reforms play in firm performance.
Additionally, our results provide support for the relevance of the agency theory, but on the other hand, evidentiary weight is also given to the stewardship theory (Oredegbe, 2.
because such findings of strict independence appear to have a certain smothering effect on informed decision-making when weakening the identity of directors in the light of the expertise of managers.
Contribution to Theory and Practice In principle, the study will make a significant contribution to understanding how prevailing theories of corporate governance, including agency theory and resource dependence theory, are applied in the unique institutional environment of the Sub-Saharan African banking sector.
This article has theoretically and empirically demonstrated that the diversity and size of risk committees have a material impact on profitability and liquidity results.
This expands the argument of the resource dependence theory (Peni & Vyhymaa, 2.
, which posits that boards provide essential resources, intelligence, and It is also more refined than agency theory, as it emerges that independent regulation improves adherence to regulations, although it does not necessarily contribute to profitability, particularly in markets with formal governance processes, as well as informal systems of influence and relationship banking (Oredegbe, 2.
Based on these findings, it is clear that future studies on governance need to adopt more convergent models, which consider the hybrid logics of formal Indonesian Journal of Sustainability Policy and Technology.
Vol 3 No 2, 2025, page 62-79 monitoring and relational, trust-based views on risk-taking behavior that influence the risk-taking activities of banks in emerging markets.
In practical terms, the results enhance the arsenal of regulators, bank managers, and policymakers who aim to create more robust and competitive banking systems.
Through empirical confirmation of the CAMELS frameworkAos fit to the governance variables, the study provides a retestable blueprint for stress-testing governance performance using risk-based performance prisms.
This is especially among SSA countries, where cases of periodic banking crises have demonstrated the ineffectiveness of the traditional prudential measures when left without governance vigilance.
The highly sophisticated insights gained from the study between Tier 1 and Tier 2 banks also serve as a valuable indicator for practitioners not to pursue a one-size-fits-all solution for designing governance codes or supervisory frameworks.
Overall, the study contributes new evidence of the importance of recognizing that robust governance is not merely a burden of compliance but rather a lever for a long-term strategy to remain stable in the market, particularly in the face of systemic risks, and provides value to SubSaharan AfricaAos dynamic financial environment.
Summary of Findings This article attempts to critically examine how the main corporate governance (CG) variables Ai risk committee size, risk committee independence, risk committee diversity, and leverage Ai impact the multi-dimensional risk and financial soundness profile of Sub-Saharan African (SSA) banks, classified as Tier 1 and Tier 2 banks.
The empirical analysis, conducted within the framework of the CAMELS model, revealed that strong CG mechanisms have a significant impact on profitability, capital adequacy, and liquidity, although they differentially affect the tier of banks.
In particular, both larger and more heterogeneous risk committees have been shown to have a positive impact on strengthening profitability and liquidity, especially in Tier 2 banks.
This indicates that expertise and perspective diversity enhance risk oversight in risk contexts with stronger and more stimulated infrastructures (Chironna et al.
, 2.
It is noted that independent risk committees raise capital adequacy and liquidity, but no significant correlation to profitability, indicating that the independence is associated with stricter regulatory compliance and constraining of excessive risk taking, but does not necessarily mean an improvement in returns, furthering the grey area and the balance between the two reported in the prior study (Oredegbe, 2.
The use of leverage also became a critical moderating factor, balancing the contest between governance and performance, as banks needed to maintain disciplined capital structures in line with their risk appetite.
The findings indicate that the interdependence between governance structure and bank risktaking is highly contextual, due to a combination of regional institutional weaknesses, legal institutions, and shareholder characteristics peculiar to the SSA.
Notably, the research expands on mainstream agency and resource dependence theories by demonstrating the influence of CG formal mechanisms on the market conditions dominated by concentrated ownership, small talent pools on boards, and varying intensities of regulatory enforcement (Benti et al.
, 2.
The results have served to address the empirical gap in SSA banking literature by signalling heterogeneous effects of governance design on various measures of risk and soundness, which sheds more light on how governance architecture needs to be adapted to local institutional ecosystems to produce any meaningful results.
CONCLUSION
The research objective has been effectively achieved.
Through the use of a strong quantitative approach, grounded in the CAMELS framework and verified through multivariate regression analysis, the researchers have produced plausible evidence that the strength of CG variables differs depending on the type of bank and its size.
The paper has not only confirmed the importance of governance in determining risk outcomes, but it has also highlighted that its effectiveness depends on the broader regulatory and market landscape within which banks operate.
These results support the position that although global governance tenets are helpful guidelines, their application to practice needs to be redefined in the context of the SSAAos institutional reality, where informing associations, capacity limitations, and disparities in ownership form unique governance problems in SSA (Oredegbe, 2.
On the whole, the research succeeds in closing the gap between theory and practice by demonstrating that efficient risk governance cannot be identified with box-ticking regulatory efforts, but rather demands that boards and policymakers develop truly independent, skilled, and diverse oversight It adds weight to the contention that the firm establishment of governance structures is Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELSBased Empirical Analysis Oluwatoyin Abayomi AMUDA.
Ayotunde Qudus SAKA.
Israel Olaniyi BAMISAYE.
Olaleye Ola ARULOGUN.
Godwin OMOREGBEE not a good option limited to reducing financial imbalances, but also to retaining investor confidence, market discipline, and the long-term viability and competitiveness of the sector.
Therefore, the study achieves its purpose of providing strong empirical evidence, comparative analysis, and feasible ways to improve bank governance in a region where cases of frequent banking distress continue to occur.
Implications The studyAos results have far-reaching implications for bank managers, regulators, and policymakers in their efforts to strengthen the stability and competitiveness of the African (Sub-Sahara.
banking sector.
As an initial takeaway, the findings support the case that investment in effective risk governance structures is a strategic consideration for bank boards and executive management, particularly in the form of having properly staffed, independent risk committees that are highly diverse in terms of both skills and demographic representation.
The combination of these factors enhances the quality of decision-making and broadens risk perspectives, which is essential in managing supremely complex market conditions (Benti et al.
, 2.
In practice, this implies that human resource and nomination committees should consider both diversity and independence as strategic governance assets, rather than merely checking a regulatory box.
Second, regulators and central banks must adjust their corporate governance codes to define more specific minimum standards regarding the composition and operation of risk committees.
For example, the enforcement of governance standards governing committee independence, diversity, and minimum size in the conditions governing bank licensing could significantly close oversight gaps that have previously contributed to banking vulnerability in SSA (Benti et al.
, 2.
Additionally, policymakers must recognize that governance efficacy is not a standalone concept, but rather it operates within a broader institutional framework, including disclosure regimes, the strength of enforcement, and market discipline mechanisms.
Hence, their findings suggest that regulatory powers should be combined with closer monitoring of the practice through the supervisor, who oversees exceptions to the governance systems in which the banks participate, rather than relying solely on formal compliance reports.
This supports the BCBS revised principles on strengthening the effectiveness of governance in banks (BCBS, 2.
, which focus not only on structural expectations but also on the quality of board oversight and accountability.
Lastly, based on the findings of the study, which indicated that Tier 2 banks were more sensitive to the aspects of governance, including those related to committee diversity, regulators are encouraged to make specific interventions based on the practical realities of small banks that may not be able to establish internal capacity or appurtenance to attract independent directors with diverse expertise.
Limitations As strong as this study is scientifically and theoretically, its contribution is not without limitations.
First, secondary data, based on published annual reports and financial statements, serve as a foundation for the analysis and are likely to be prone to reporting bias due to inconsistencies in reporting, particularly in areas with lax disclosure enforcement (Chironna et al.
, 2.
Second, the cross-sectional characteristics of the data limit the ability to assess the dynamic cross-relationship between changes in governance and risk outcomes over time.
A longer panel data set might have provided better clues to the causality and temporal variance of governance effectiveness.
Third, the five-country case study targeted Tier 1 and Tier 2 banks, but did not include microfinance institutions or non-bank financial intermediaries, which are becoming highly relevant actors within the financial landscape in SSA and have special governance and risk concerns (Ghanad, 2.
Furthermore, although critical macroeconomic variables and firm-level variables were controlled for when investigating the linkages in the study, all potential contextual factors Aisuch as political risk, regulatory arbitrage, or ownership concentration .
bove the board leve.
Ai that could moderate or mediate the observed relationships were not adequately controlled (Ghosh, 2.
Such limitations necessitate considering the results from a methodological perspective and within the scope of available data limitations (Walliman, 2.
Policy Recommendations Based on the results, several practical recommendations can be suggested to strengthen the CG framework and risk management in SSA, which could be applied by directors and senior management of banks, regulatory bodies, and lawmakers (Bencharles & Nwankwo, 2.
To start with, regulators are advised to reconsider setting the minimum standards for the risk committee composition, which should require independence not only in name but also in actual functional expertise and demographic Indonesian Journal of Sustainability Policy and Technology.
Vol 3 No 2, 2025, page 62-79 makeup, reflective of a bankAos risk position and market exposure.
To ensure that governance codes are not only enforced procedurally, central banks and supervisory authorities should reinforce their monitoring mechanisms, potentially by conducting regular third-party audits of the effectiveness of the boards and the functioning of board committees (Benti et al.
, 2.
Second, bank managers should not view board diversity or board independence as a compliance burden, but rather as a strategic initiative for senior management.
The company needs to develop policies that actively cultivate human resources as future pipelines for directors, with a focus on gender balance, technical expertise in risk management, and cross-border regulatory experience.
This could be recognized by industry associations and regulators through the provision of training programs in governance and the development of director certification regimes tailored to the specific circumstances of the banking markets in SSA (Benti et al.
, 2.
Third, a more expanded institutional framework that will help increase governance effectiveness should be supported by policymakers, i.
by strengthening disclosure standards and ensuring accountability, as well as enhancing market discipline through a viable whistleblowing protection system and stakeholder involvement methods.
These policies will collectively cushion the sector against governance failures that have been known to intensify financial crises in the region (Kafidipe et al.
, 2.
Recommendations for Future Research The next step in the research may be a study that directly follows the development of the study and considers the impact of governance reforms on risk outcomes across various business cycles, thereby recording the interaction between the cycle effects of governance and financial stability in a dynamic Comparative research of two or more SSA countries, or SSA and other emerging markets, may also provide more insight into how institutional environments moderate the performance of governance arrangements (Benti et al.
, 2.
Alongside quantitative evidence, an exploration of the practice of governance through a focus on how it has manifested within corporate case studies, or through interviews with regulators, board members, and risk managers, could supplement quantitative findings by highlighting where formal systems of governance break down to informal systems or political influence (Bencharles & Nwankwo, 2.
In addition, scholars may want to consider a broader set of governance variables by examining board tenure.
CEO duality, ownership structures, and compensation schemes, in an attempt to identify the interactions between these variables and the dimensions of risk-taking and soundness in SSA Lastly, since digital banking and fintech are already influencing the traditional concept of the banking industry, future research should focus on how governance frameworks are evolving to address the risks posed by technology and the emerging patterns of regulation.
These extensions will enhance our understanding of governance by being context-sensitive and evolving as a system, constantly adjusting to new market realities in Sub-Saharan Africa, as necessary to ensure the financial stability of the systems (Kafidipe et al.
, 2.
Abbreviations SSA: Sub-Saharan Africa.
CAMELS: Capital adequacy.
Asset quality.
Management quality.
Earnings.
Liquidity, and Sensitivity to market risk.
BCBS: Basel Committee on Banking Supervision.
ROE: Return on Equity.
CAR: Capital Adequacy Ratio.
LQ: Liquidity.
RCI: Risk Control Index.
RCS: Risk Control Structure.
RCD: Risk Control Disclosure.
BS: Board Size, and LEV: Leverage.
AuthorsAo contribution Each author contributed equally to the research and writing the manuscript.
AuthorsAo Information Oluwatoyin Abayomi AMUDA .
amuda@rgu.
Department of Accounting and Finance.
Robert Gordon University.
Scotland.
United Kingdom.
Ayotunde Qudus SAKA .
saka@lasu.
Department of Accounting.
Lagos State University.
Nigeria.
Israel Olaniyi BAMISAYE (Israeljah05@gmail.
Department of Accounting.
Ekiti State University.
Ado-Ekiti.
Nigeria.
Olaleye Ola ARULOGUN .
oarulogun@lautech.
Open and Distance Learning Centre.
Ladoke Akintola University of Technology.
Ogbomoso.
Nigeria.
Evaluating the Impact of Corporate Governance on Bank Risk and Financial Stability in Sub-Saharan Africa: A CAMELSBased Empirical Analysis Oluwatoyin Abayomi AMUDA.
Ayotunde Qudus SAKA.
Israel Olaniyi BAMISAYE.
Olaleye Ola ARULOGUN.
Godwin OMOREGBEE Godwin OMOREGBEE5 .
omoregbee@lasu.
Department of Accounting.
Lagos State University.
Nigeria.
Conflict of Interest The authors declare no competing interests.
Funding This research received no external funding.
Availability of data and materials Data are available on the companyAos website and the banksAo directory.
REFERENCES