A demand on educating investors on the banking sector procedures.
A study issued by Dr. Salwa Dirar, from King Khalid University (KKU) reveals the importance of introducing the concept of governance, its mechanisms and principles, and its importance, to assess the financial banking sector performance. This is based on the Consideration that the application of governance with its known standards, is one of the important guarantees for the creation of banking entities which is able to compete. In addition, the study aimed at identifying the effectiveness of the application of governance and its mechanisms for evaluating the performance of banks.
The study pointed out that separation of ownership from its management showed owners' conflicting interests and management in joint-stock companies. It also a cause of problems on the extent of banks' commitment to implement governance, the significant effect of the application of governance and mechanisms on evaluating the performance of the banks, the availability of transparency, and the disclosure of all the works and activities of the bank and its management. The study also revealed the existence of a relationship between the application of corporate governance in banks, and the improvement and performance assessment, noting that the bank's commitment to implement corporate governance leads to the right to accountability. In addition, the study showed the existence of a relationship between governance and the increased transparency in the financial statements, and to the protection of shareholders' rights.
In her study, the researcher found that the application of the principles of corporate governance in the banking system leads to ensuring the safety of the financial performance evaluation, and to the fighting against corruption in order to protect the rights of all parties. The system of internal control and audit committees within the banks play a major role in activating the governance style through carrying out the link between the Board of Directors of the bank and the external auditor, as well as the achievement of independence to get to transparency and full disclosure in the financial statements through the quality of professional performance.
The study recommended the need to work on strengthening the ensuring of auditors' integrity, independence, and objectivity through their supervisory role. Moreover, the study recommended the need to educate investors about their rights with regard to accountability to the members of the Board of Directors and the Executives.