Governance Practices and Bank Performance in Africa: A Panel Data Analysis of ESG Scores and Financial Outcomes

Abstract

Corporate governance remains a cornerstone of financial stability and strategic success within the banking sector. In the context of Africa’s evolving capital markets, the influence of governance on financial performance is increasingly critical, yet underexplored using standardized ESG metrics. This study assessed the effect of governance practices on the financial performance of listed commercial banks in Africa, using Return on Assets (ROA) as the key performance indicator. The study employed panel data from 15 commercial banks across South Africa, Egypt, and Morocco over a ten-year period (2013–2022), utilizing governance scores from the LSEG ESG database. A fixed-effects regression model was applied to estimate the impact of governance on ROA. Descriptive statistics revealed a moderate average governance score of 45.58, with ROA averaging 0.03. Regression analysis showed that governance had a statistically significant positive effect on ROA (β = 0.000126, p < 0.001), accounting for 56.5% of its variation (R² = 0.5649). The study concludes that governance reforms enhance profitability. It recommends that banks deepen governance transparency and align disclosures with investor expectations for long term profitability and sustainability

Keywords: Governance, Financial Performance, ROA, ESG