The relationship between corporate governance and internal control in banks; A Literature Review

Abstract

This systematic literature review examines the relationship between corporate governance and internal control in the banking sector, an area critical for prudential regulation, risk containment, and financial system stability. Effective governance structures are essential in ensuring that internal control mechanisms operate as safeguards against fraud, operational errors, and excessive risk-taking issues that have become increasingly salient in the aftermath of global financial crises and recent bank failures. The review synthesizes peer-reviewed studies published between 2020 and 2025, identified through Scopus, Web of Science, SSRN, and ScienceDirect. Following PRISMA standards, 482 records were screened, 32 studies met inclusion criteria, and their quality was appraised using the CASP framework. The included studies span Asia, the Middle East, and Africa, with a predominance of quantitative and cross-sectional designs. Evidence converges on several themes: (i) board independence, expertise, and diversity strengthen internal control oversight; (ii) ownership structure particularly institutional and state ownership affects control quality through monitoring incentives; (iii) audit committee expertise and activity frequency are consistently linked to fraud reduction; and (iv) regulatory reforms and Basel-aligned governance codes enhance control integrity when effectively enforced. Nevertheless, the literature remains fragmented, with inconsistent measurement of governance proxies and limited longitudinal or comparative designs. Overall, the evidence suggests that stronger governance enhances internal control effectiveness, but its impact depends on contextual and institutional maturity. Regulators and boards should integrate governance and control frameworks to reinforce transparency and accountability, while future research should address cross-regional and digital-governance dimensions.