Journal of Applied Finance & Banking

Corporate Governance Mechanisms Adopted by UAE National Commercial Banks

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• Abstract

  The purpose of this paper is to enhance understanding of corporate governance (CG) in the banking sector and to explore the existence and practice of corporate governance mechanisms in United Arab Emirates (UAE) national commercial banks. More specifically, the paper is targeted to examine whether the mechanisms forced by the law; Board of Directors, Auditors, Audit Committee and Credit Committee, are used by UAE banks and if the majority of these banks choose independent boards. This descriptive study conducted on all UAE national commercial banks over the year 2014, indicates that most of the corporate governance mechanisms adopted by banks are those imposed by laws and regulations, all banks have a board of directors, an auditor, an audit committee and an executive committee. However, most of these banks have other committees voluntarily created to enhance corporate governance systems in these banks, such as nomination, numeration and risk management committees. The domination of non-executive directors (NEDs) on the board and the lack of board duality reflect that the banks are increasingly adopting a more independent board of directors. Finally, the study reveals the importance of internal mechanisms vis-à-vis external norms. The paper provides a comprehensive study to help understand key mechanisms of CG, particular used by UAE banks. Therefore, it helps policy makers, shareholders and other stakeholders to maintain effective corporate governance systems which enhance the effectiveness of financial institutions.