A study on corporate governance practices of selected banks in india

Abstract

There are many factors which affect Corporate Governance. It is highly difficult to comprehend Corporate Governance and define it. Yet, research is imperative to understand the changing specific needs of good Corporate Governance practices and the impact of such practices. newlineIn this study the Corporate Governance of banks in India has been studied with the help of a Corporate Governance Index especially designed for banks. The index, divided into six sub indices, was used to find correlation of CG practices with the bank s profitability measured in terms of Return on Assets (RAO) and Net Interest Margin (NIM) and also with firm value measures in terms of Price to Book value (PBV) and Tobin s Q. A comparison of CG practices of CG rated public and non-rated private sector banks in India was also made. For the purpose of study Selective sampling of ten banks in India were selected comprising of equal number of public and private sector banks and the data was collected for eight year period from 2009 to 2016. newlineFixed regression model was run to know the relationship between the sub indices and the dependent variables. Apart from CG index, Capital Adequacy Ratio (CAR) and Net NPA ratio were taken as independent variables. A weak correlation was found between CG and ROA and NIM and significantly high relation was established between CG and PBV and Tobin s Q. The governance practices and financial performance of private banks were found to be superior to public banks.