The Impact of Board of Directors' Characteristics and Chief Executive Officer Attributes, under the Influence of Control Variables, on Financial Performance: An Applied Study of Libyan Commercial Banks

Abstract

This study examines the relationship between corporate governance mechanisms and financial performance in Libyan commercial banks by focusing on the characteristics of the board of directors and the chief executive officer (CEO), while emphasizing the role of control variables in explaining this relationship. The explanatory variables include board size, board independence, board meeting frequency, the CEO’s educational level, and CEO tenure, whereas financial performance is measured using return on assets (ROA) and return on equity (ROE). Bank size, bank age, and financial leverage are incorporated as control variables to account for structural differences among banks. A dual methodological approach is employed, combining panel data analysis for a sample of seven commercial banks over the period 2007–2021 with Structural Equation Modeling (SEM) to assess both the partial and overall effects of governance mechanisms on financial performance while controlling for structural factors. The empirical analysis is conducted using SPSS and EViews. The findings reveal a strong consistency between the panel data and SEM results, indicating that board independence and board meeting frequency have a positive and statistically significant impact on ROA, while the CEO’s educational level and tenure play a pivotal role in enhancing financial performance. The study concludes that integrating panel data analysis with SEM enhances the robustness and explanatory power of the results and recommends the adoption of comprehensive banking governance frameworks that account for the structural characteristics of Libyan banks to improve their financial performance.