IMPACT OF CORPORATE GOVERNANCE ON FIRM PERFORMANCE OF NEPALESE COMMERCIAL BANKS

Abstract

Corporate governance refers to the interaction among shareholders, the board of directors, and top management in determining the corporation's performance and strategic direction. It also involves the relationships between stakeholders and the goals that guide the company's governance. The primary aim of the study is to identify the dimensions representing corporate governance and banking performance, and to explore the relationship between these factors. Specifically, the study seeks to analyze the impact of corporate governance on the performance of Nepalese commercial banks. A descriptive, causal-comparative research design was used in this study, which explains the relationship between various variables or characteristics and their underlying causes. The survey includes 20 commercial banks, with 10 of these selected for the study. The study reveals that board size, earnings per share, and the presence of female directors negatively affect ROA, NIM, and ROE. Among these, board size shows a statistically significant impact, while earnings per share and female directors do not. Additionally, ethnic group and capital adequacy ratio positively influence ROA, NIM, and ROE, with the capital adequacy ratio having a statistically significant positive impact on performance, and ethnic group also showing significance. Therefore, there is a linear relationship between ROA, NIM, and ROE and the factors of board size, earnings per share, ethnic group, capital adequacy ratio, and female directors.