Corporate Governance and Bank Performance in Nepal

Abstract

This paper examines the impact and importance of Corporate Governance on firm performance. The return on assets and return on equity are selected as Bank’s performance variables for this study and these two are the Dependent Variables. Board Size, Total Assets and Executive CEO of the firms are the independent Corporate Governance variables. The data are collected from the Banking and Financial Statistics published by Nepal Rastra Bank, NRB Directives, legal provisions incorporated in Companies Act, 2063 and concerned by-laws regarding corporate governance, the provisions on Bank and Financial Institution Act, 2063; supervision report of Nepal Rastra Bank .In addition to these, different published articles, reports, books and magazines are also analyzed. The information regarding compliance of legal provisions on corporate governance are collected from Regulation and Supervision Department of Nepal Rastra Bank, Company Registrar Office and also from the concerned bank. The multiple regression models are applied to test the significance and importance of corporate governance in the Nepalese commercial Banks.The result shows that there is a significant impact of corporate governance on ROA as well as ROE in the financial institutions mainly Commercial Banks. The impact of board size and total assets are positively significant with return on assets whereas the executive CEO has insignificant effect on return on assets. Board size and executive CEO have significant effect on ROE but total asset has insignificant effect on ROE.