Corporate governance and firm performance: Evidence from banking industry in South Asia

Abstract

This study analyzes the efficacy of risk management governance mechanisms, such as a dedicated risk governance committee and chief risk officer (CRO) on the executive board. This study evaluates the importance and effect of each risk governance variable on the bank’s financial performance and emphasizes financial sustainability through risk management governance. Financial performance, measured using the returns ratios, significantly differs among banks with and without a CRO on the executive board. Financial performance, taken as a function of banks’ corporate governance, assumes a positive and significant impact, which implies that risk governance can lead to sustainable financial performance. Overall, this study contributes to literature on the relationship between governance structure and financial performance in banking industry.