Corporate Governance and Banks’ Performance: An Empirical StudyNaresh Kumar

Abstract

Corporate Governance is more a way of business life than a mere legal compulsion. There is nothing laudable about complying with conditions or practices which any financial institutions are forced to adopt through the process of legal prescription. Financial institutions must focus on their core objective of earning profits, but the earning and sharing of profits needs to be aligned with expectations of stakeholders. The objective of the study is to analyze the impact of corporate governance on the performance of selected top five public sector banks and private sector banks as per market capitalization. The required secondary data is collected from corporate governance reports and audited annual reports of selected banks for the time period of five years i.e. from year 2010-11 to year 2014-15.Panel data regression and Pearson correlation tools are used with help of SPSS. The study found that board size has positive significance impact on Return on Equity, Return on Asset and Net Non-Performing Asset whereas the ratio of outside directors and number of meetings have negative significance impact on Return on Equity in selected public sector banks. Increase in board size and ratio of outside directors have positive impact on performance variables Return on Equity and Return on Asset whereas decrease in the board size and ratio of outside directors have negative impact on Return on Asset in selected private sector banks.