Corporate Governance Mechanisms and Financial Stability in African Firms: The Moderating Effect of Religious Diversity

This study examines the relationship between corporate governance mechanisms and financial stability in non-financial firms listed on African stock markets, with a specific focus on the moderating role of religious diversity. A quantitative research design was employed, using data from 281 non-financial listed firms across 23 African countries over the 2012–2022 period. A two-step system dynamic generalized method of moments (GMM) was implemented to analyze the data. Corporate governance mechanisms, including board independence, board size, board effectiveness, and chairman duality, positively influence financial stability. Furthermore, religious diversity moderates these relationships, amplifying the positive effects of governance mechanisms on financial stability. Managers should prioritize religious diversity in board composition to strengthen governance and financial stability. Inclusive recruitment practices, cultural competency training, and policies that support diverse representation can enhance board effectiveness. This study extends the understanding of corporate governance by highlighting the significant role of religious diversity. It also provides new insights into how religious diversity can influence the effectiveness of governance mechanisms in enhancing financial stability, particularly in African markets.