An Empirical Study on Components of Corporate Governance and Its Impact On Banks Performance

Abstract

The globalization of banking markets has raised important issues regarding corporate governance regulation for banking institutions. Effective corporate governance practices are essential to achieving and maintaining public trust and confidence in the banking system, which are critical to the proper functioning of the banking sector and economy as a whole. The presence of an effective corporate governance system, within an individual company and across an economy as a whole, helps to provide a degree of confidence that is necessary for the proper functioning of a market economy.” From a banking industry perspective, corporate governance involves the manner in which the business and affairs of banks are governed by their boards of directors and senior management, which affects how they function and has some of its objectives as meet the obligation of accountability to their shareholders and take into account the interests of other recognized stakeholders; align corporate activities and behavior with the expectation that banks will operate in a safe and sound manner, and in compliance with applicable laws and regulations. This research paper addresses some of the major issues of corporate governance as it relates to banking regulation with objectives to study the corporate governance of the selected bank. Also to measure the impact of component of corporate governance on its performance. An attempt is made to find out the relationship of banks profitability with the help of ROA (Return On Assets), ROE (Return On Equity), NPM (Net Profit Margin), and TOBIN Q. For the same, five components viz, Shareholders and general shareholders meeting, Board of Directors, Supervisory board, Disclosure and transparency, auditing and Violation are used. The study conclude that in private banks supervisory board is not good because it CGI (Corporate Governance Index) point lies below the MIN point and there is need to improvement in his operation policy and paid based on their performance.

Keywords: Corporate Governance, Banking Regulation, CGI Scoring

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