Abstract
Corporate governance (CG) is now a world phenomenon and the nucleus of economic regulations. History evidenced that failure in corporate governance might lead to economic turmoil. Governance of banks is particularly important for a country like India which is still in the path of economic development. In this paper, we have tried to establish the nexus between corporate governance practices and financial performance of selected Indian public sector banks. The study is empirical in nature and is based on secondary data collected from CMIE Prowess database. We have considered ten public sector banks based on their balance sheet size covering seven years ending on 2019. We have used Correlation and Regression Model to achieve our objectives. Two performance variables, eight corporate governance variables and two control variables have been used for this purpose. Based on the diagnostic tests, we applied fixed effects generalised least square (GLS) regression. Our results showed that financial performance (ROA and ROE) is negatively associated with board size, board meetings, board committees and board independence. On the contrary, we found a positive relationship between the number of woman directors, executive directors, non-executive directors and banks' performance measures. Finally, we suggest that public sector banks should not have a board size beyond a certain limit. Our study will provide a new dimension to the existing literatures regarding the impact of governance and banking sector in particular.
Highlights
Over the last three decades, the Indian economy as well as the global economy have been in turmoil because of the unforeseen catastrophes of big corporate houses
The average number of woman directors, executive directors and non-executive directors sitting on the boards is 1, 3 and 6 respectively
Non-executive directors (H7), we rejected the null hypothesis relating to both performance measures. These three board variables have no significant impact on performance of selected Indian banks though we find a positive association between these governance parameters and performance measures
Summary
Over the last three decades, the Indian economy as well as the global economy have been in turmoil because of the unforeseen catastrophes of big corporate houses For these failures, the men in charge of the company have always been responsible. The men in charge of the company have always been responsible It is because of the misconduct or frauds of some people at the top level that some of the prominent companies have met with sudden downfall. The global economy has seen tragic failures of some of the renowned companies like Enron, WorldCom, Bank of Credit and Commerce International (BCCI) etc. Because of these corporate failures, corporate governance has been successful in captivating economic deliberations and global concern. Governance of the banking industry is of paramount importance as governance
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