CORPORATE GOVERNANCE, BOARD CHARACTERISTICS AND PERFORMANCE OF INDIAN BANKS: AN EMPIRICAL STUDY

Brahmaiah Bezawada,Sager Reddy Adaelli

doi:10.32479/ijefi.9536

Abstract

The paper examines the corporate governance, board characteristics, performance and asset quality of Indian banks and investigates the impact of a set of board characteristics on performance and asset quality of banks. We use a sample of 34 scheduled commercial banks, for ten years from 2009 to 2018, accounting for about 90 per cent of the total banking assets and banking business India. We measure bank performance by return on assets (ROA) and asset quality of banks by ratio of net non-performing assets (NNPA) and document evidence on the role of the board characteristics on performance and asset quality of banks. The study finds that the board size and percentage of independent directors have significantly positive impact on ROA. The percentage of executive directors is having significantly negative relationship with the ROA. The board size and percentage of independent directors have significantly negative relationship with banks’ NNPAs. The research suggests that the board of directors play a significant role in bank governance in India. The paper contributes to the literature on the corporate governance of banks in India, which is one of the emerging economies of the world. The research results provide some insights of corporate governance to the RBI for considering appropriate policy guidelines on corporate governance to banking industry in India.

Highlights

The global financial crisis of 2008 attracted more attention on the corporate governance of banks
There are 84 scheduled commercial banks (SCBs) in India consisting of 19 public sector banks (PSBs), 18 private sector banks (PVBs) and 47 foreign banks (FB)
The board characteristics variables include the number of directors serving on the board (Board Size, bs); the percentage of independent directors in the board (Indep Director, pid), percentage of busy directors on the board (Busy Director, pbd) where the busy director is defined as the director who serves on three or more boards, percentage of executive directors,(Exe Director, ped), and number of meetings held per year

Summary

INTRODUCTION

The global financial crisis of 2008 attracted more attention on the corporate governance of banks. There are 84 scheduled commercial banks (SCBs) in India consisting of 19 public sector banks (PSBs), 18 private sector banks (PVBs) and 47 foreign banks (FB).. There are 84 scheduled commercial banks (SCBs) in India consisting of 19 public sector banks (PSBs), 18 private sector banks (PVBs) and 47 foreign banks (FB).1 These banks account for about 90% of the. The Securities and Exchange Board of India (SEBI) has introduced a sound corporate governance system to improve the.

LITERATURE REVIEW

DATA AND METHODOLOGY

12 Capital Ratio

Findings

CONCLUSIONS