The Impact of Board of Directors’ Characteristics on Financial Performance: The Moderating Role of Voluntary Risk Disclosure in the Iraqi Banking Sector

Abstract

This study investigates the effect of board of directors’ characteristics on the financial performance of banks in Iraq, while also examining the moderating role of voluntary risk disclosure (VRD). Drawing on agency theory and legitimacy theory, the study explores how specific governance mechanisms namely board size, board independence, and frequency of board meetings influence key performance indicators: return on assets (ROA), return on equity (ROE), and Tobin’s Q. VRD is conceptualized as a transparency tool that may enhance or weaken the effectiveness of board-level governance in shaping firm outcomes. The study employs a panel dataset of 34 Iraqi banks over the period 2010–2023 and applies multiple regression techniques to test the hypotheses. The results reveal that board size and board independence have a significant positive impact on financial performance, while board meetings exhibit a mixed findings with negative effect on Tobin’s Q. Importantly, VRD is found to positively moderate the relationship between board characteristics and ROA but not ROE or Tobin’s Q. These findings offer theoretical contributions to the corporate governance literature in emerging markets and provide practical implications for policymakers, bank executives, and regulators seeking to improve governance and performance in the post-conflict Iraqi banking sector.