Are Emerging Economies Adopting Robust Corporate Governance Practices - Empirical Insights from Indian Banks

Abstract

Corporate governance is expected to play a pivotal role in shaping the business environment and driving sustainable economic growth in emerging economies like India. By adopting and enforcing robust corporate governance practices (CG practices), emerging economies can overcome challenges and mitigate risks to foster sustainable development. Nevertheless, the question still prevails as to whether emerging economies like India are embracing strong CG practices in actuality? Our research assessed the CG practices of banking industry of an emerging market India using unique Indian CG Scorecard (designed by BSE, IiAS and IFC. A sample of six public and six private Indian banks (with highest market capitalisation) was taken and data was extracted from their Annual reports for time period (2010-2011 to 2019-2020). Independent sample t-test was used to compare practices of public and private banks in India. The results indicated growing adoption of robust CG practices in Indian Banks signifying that CG practices of emerging economies are undoubtedly comparable to those of developed economies. Nevertheless, none of the banks in India exhibited commendable performance across all the different CG categories. Surprisingly, one bank, HDFC bank emerged as the Leader in Corporate Governance among all banks. Interestingly, CG practices of the public and private sector banks in India were not significantly different, though some variations across different CG categories/parameters were witnessed. The research has strong implications for regulators, banks practitioners and other stakeholders in emerging economies like India to ensure effective framing and efficient implementation of CG regulations for building market confidence, transparency, increased access to global portfolio equity and overall sustainable economic development.

Keywords: Corporate Governance, Indian CG Scorecard, Public Sector Banks, Private Sector Banks, India, Emerging Economies

View PDF