What Is The Nexus Between Corporate Governance And Sri?
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Answer:
Universal Journal of Accounting and Finance 8(4): 140-147, 2020
DOI: 10.13189/ujaf.2020.080406
Nexus between Corporate Governance and Financial
Performance: Corroboration from Indian Banks
Sanjeeb Kumar Dey*, Debabrata Sharma
Department of Commerce, Ravenshaw University, Odisha-753003, India
Received September 21, 2020; Revised November 17, 2020; Accepted November 29, 2020
Cite This Paper in the following Citation Styles
(a): [1] Sanjeeb Kumar Dey, Debabrata Sharma, "Nexus between Corporate Governance and Financial Performance:
Corroboration from Indian Banks," Universal Journal of Accounting and Finance, Vol. 8, No. 4, pp. 140 - 147, 2020. DOI:
10.13189/ujaf.2020.080406.
(b): Sanjeeb Kumar Dey, Debabrata Sharma (2020). Nexus between Corporate Governance and Financial Performance:
Corroboration from Indian Banks. Universal Journal of Accounting and Finance, 8(4), 140 - 147. DOI:
10.13189/ujaf.2020.080406.
Copyright©2020 by authors, all rights reserved. Authors agree that this article remains permanently open access under
the terms of the Creative Commons Attribution License 4.0 International License
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.
Keywords Corporate Governance, Bank, India,
Performance, ROA, ROE
1. Introduction
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. 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. These failures
have rose a question the answer of which is not yet clear;
“who will guard the guards?” During the said period, there
have been a number of governance scandals which
displayed lack of ethical corporate behaviour. In India,
some of the reputed companies like Satyam, Kingfisher
Airlines, PNB, and Sahara India etc. have failed
shockingly only because of their corporate misconduct
and fraudulent practices. The global economy has also
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.
Corporate governance has been accepted as one of the
most essential factors for economic growth and stabilit