The Foreign Equity in Banking Industry and the Effectiveness of Corporate Governance: Essential or a Soap Opera?

This study investigates the impact of foreign equity and foreign board members on corporate governance mechanisms in banking industry in a developing country. Using a data set of recent period and OLS regression model, the effect of board size and composition on performance is analyzed. The results indicate that the presence of foreign equity and board members forces banks to reorient the corporate strategy and reduce operating and total costs. Foreign board members’ independence appears to play an important role in the corporate orientation and internal cost management. The study could be an example for banks in countries experiencing similar conditions.