How Return on Equity Effected by Corporate Governance: The Mediating Role of Loan to Deposit Ratio

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This study examines how corporate governance affects the financial performance of GCC banks, focusing on the mediating role of liquidity.Using data from 2014 to 2021 from 55 GCC banks, and analyzed with PLS-SEM, the study investigates the impact of corporate governance metrics-board size, independence, diversity, and meeting frequency-on Return on Equity (ROE), with control variables including total assets and GDP.Findings show no significant impact of board diversity, size, or independence on ROE, while frequent board meetings negatively affect ROE due to increased administrative costs.A significant negative relationship between liquidity and ROE suggests high liquidity can lower equity returns, emphasizing the importance of balancing liquidity management and investment for optimal performance.Liquidity mediates the relationships between board independence and ROE and between board meeting frequency and ROE, shifting initially non-significant results to significant negative impacts.However, it does not mediate the relationships between board diversity, size, and ROE, indicating that liquidity's mediating role depends on specific governance factors.