The IUP Journal of Corporate Governance
Board Characteristics, Institutional Shareholding and Banks' Performance: Evidence from Indian Banking Sector
Article Details
| Pub. Date | : Jan, 2020 |
|---|---|
| Product Name | : The IUP Journal of Corporate Governance |
| Product Type | : Article |
| Product Code | : IJCG30120 |
| Author Name | :Ketan Mulchandani, Kalyani Mulchandani, Megha Jain |
| Availability | : YES |
| Subject/Domain | : Management |
| Download Format | : PDF Format |
| No. of Pages | : 15 |
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Abstract
Good governance practices enhance monitoring and therefore BASEL III has also given importance to corporate governance. The Indian regulatory body of banks, the Reserve Bank of India (RBI) has also provided a "fit and proper" framework for the selection of board. The recent scams in the banking sector have also necessitated good governance practices in India and across the world. Therefore, this study is an attempt to assess the effect of corporate governance measures on the financial performance of banks listed on BSE 500. Panel data analysis is performed on the data. Dependent variable is return on assets, whereas proxy measures are taken for independent variables: board's composition, board's leadership and board's activity. Institutional ownership is also taken as an independent variable. The model incorporated control variables which have been popularly listed in the past literature. The results indicate that size of the board and number of board meetings held in a year do not influence return on assets, whereas proportion of independent directors and female directors on board, CEO duality and institutional ownership significantly and positively influence return on assets. In control variables, size and loan amount are significant variables. Asset size has negative coefficient, whereas loan size has positive coefficient.
Description
In the recent past, there has been a number of remarkable studies conducted on corporate governance (Ghosh, 2006; Adams et al., 2010; and Adams, 2012). Many studies have been undertaken at the firm level which studied the effect of corporate governance on profitability or on growth (Pi and Timme, 1993; Yermack, 1996; and Adams and Ferreira, 2009). Most of the research is on the manufacturing sector companies, especially in developed markets (Koke and Renneboog, 2005; and Bulan et al., 2010). Very few research works have been undertaken on emerging economies, and works on banking sector are also meager.
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