CORPORATE GOVERNANCE AND EARNINGS MANAGEMENT

Abstract

Corporate governance improves banking performance by guaranteeing openness and accountability. The purpose of this research is to analyze variables reflecting corporate governance and banking performance, to investigate the link between bank size, board characteristics, and asset quality and bank earnings, and to assess their combined effect on earnings management. The study uses a descriptive and causal research approach to examine corporate governance and its impact on earnings management in Nepalese commercial banks. Secondary data were gathered from the annual reports of three commercial banks: Kumari Bank Limited (KBL), Everest Bank Limited (EBL), and Nepal Bank Limited (NBL), covering a 10-year period (2013/14 to 2022/23). These banks were selected via non-probability purposive sampling. Statistical methods including descriptive analysis, correlation analysis, and regression analysis were used to understand the data. The findings show that bank size, board structure, and asset quality have a considerable impact on earnings management. Specifically, board traits have a favorable link with profitability, but asset quality has a negative influence, emphasizing the necessity of competent asset management. Furthermore, the study emphasizes the need of independent boards in strengthening governance and increasing financial performance. According to the findings, Nepalese commercial banks should emphasize asset quality management and improve corporate governance processes in order to achieve long-term financial performance. Future research might increase the sample size to include additional banks, providing more thorough information.