Corporate Governance Practices and Non-performing Loans in Banking Sector of Bangladesh: A comparative Study

Abstract

Purpose: This study attempts to identify & significantly examine how corporate governance practices interact with non-performing loans in the banking sector of Bangladesh. Corporate governance (CG) is one of the significant factors that has gained considerable attention due to several rising scams in the banking sector. Recent global financial crisis as well as collapse of few local and global splendens entities like Bismillah Group, Hallmark, MCI Inc., and WorldCom etc. have strongly affected the banking sector globally that forced to rethink the overall banking structure. Methodology: The present study was descriptive in nature for which convenient sampling method was used to select the sample banks. Required data were collected from diversified data sources and tested with Microsoft Office (MS Excel). Findings: The study found that different persons and sectors like debased and dishonest bank officials of BB, top management and powerful political figures commonly affect the lending decisions. CG practices ought to be fortified as well as careful and tactful lending decisions must be ensured to stop credits turn bad. Practical Implications: Sometime, banks don't adhere to the principles and guidelines formulated by BB appropriately which are the constraints to operate business soundly. Each of the identified factors here ought to be analyzed cautiously so as to improve CG practices among the banks for fortifying the banking sector. Originality: Researchers tried to track down the relationship between CG practices and their effect on NPLs in BD perspective considering the financial data of respective entities. The present paper simply added some new nfluencing factors to the several prior works in this field which made it unique. Research Limitations: Researchers considered a limited part of the entire banking sector (only 12 of 61banks) which has shown a partial status of this sector. It would be possible to take private, specialized, Islamic and state-owned banks‘ data and make a comparison to show the desired real picture of CG practices and non-performing loans of the whole banking sector.