Corporate Governance and Performance of Nepalese Commercial Banks

Abstract

Corporate governance has become one of most talked about issues around the world to make financial and non-financial institution to become more accountable and transparent. Financial institutions have major role in country's economy. The central banks are responsible to make banking sector more reliable and governed. For survival of banks it's equally important to have good performance. So this study is mainly concerned to know the relationship between the corporate governance variables and performance variables. Board member size, number of independent variable, bank size, earning per share, capital adequacy ratio and leverage were taken as independent variables whereas return on equity and net interest margin were taken as dependent variables. The study was conducted among 11 commercial banks of Nepal. The data were collected from the annual reports of the banks. Correlation and regression analysis was used to determine the relationship and level of significance. The result showed the relationship between board member size and return on equity was negative whereas relationship between number of independent directors and earnings per share were positive. The relationships with other variables were not significant. The banks should minimize the numbers of directors in board and add the number of independent directors in banks for better performance. The central banks should focus on growth of banks and properly govern the activities of banks.