Impact of Board Size, Board Independence, Foreign Ownership, Bank Size and Leverage on Bank Performance in Nepal

Abstract

This study examines the relationship between the corporate governance and bank performance in Nepal. The performance of the banks is analyzed through return on asset (ROA) and return on equity (ROE). The data set is obtained from annual reports for the year 2007/08-2011/12. Further, 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 are also used.The result shows that there is a significant impact of corporate governance on ROA as well as on ROE in the financial institutions mainly Commercial Banks. The impact of board size is negative and significant on return on assets. However, there is no relationship between return on asset and number of audit committee meetings. Results also show that foreign ownership has significant and positive impact on bank performance.