Investigating the impact of governance, risk and compliance on investor confidence in Maltese credit institutions

Abstract

This research was carried out as a reaction to the post financial crisis era. The study aimed to investigate whether the perceived adherence by financial institutions to Governance, Risk and Compliance (GRC) practices as a holistic concept would increase consumer confidence in credit institutions in Malta. The research collected primary data through two different questionnaires, which were distributed to both the general public and also to four officials from Maltese credit institutions. By analysing the consumers’ opinions and contrasting these with those of experienced professionals in the industry, an insight of the gaps between the professionals’ opinions and that of their customers was achieved. The findings indicate that Governance, Risk and Compliance practices have a positive impact upon investor confidence in the Maltese context. It also emerged that good Corporate Governance had the highest impact on increasing investor confidence. The findings also suggest that by emphasizing their adoption of strict Governance, Risk and Compliance, local credit institutions would be achieving a more successful result than if they were to simply use media campaigns or to offer high interest rates for depositors. The results also seem to indicate that the growing level of tertiary and post-tertiary education is also helping to increase investor awareness of the current financial environment and the importance of assessing elements other than financial return when choosing a financial institution. Thus, the use of GRC may ultimately bring benefits to the credit institutions using it, apart from increasing investor confidence. These findings build upon results seen during the review of existing academic literature. If confirmed by a more extensive study, the results of this research could have a significant impact on the shaping of local financial institutions’ future strategies.