CORPORATE GOVERNANCE STRUCTURE AND PERFORMANCE OF NEPALESE BANKS

Abstract

The purpose of this study was to know the relationship and impact of corporate governance structure and performance of Nepalese banks. This study investigates the effect of corporate governance structure and performance of Nepalese banks by using secondary data. Corporate governance is an important concept which has been put into practice because of the needs of corporations to constantly be efficient and perform better; and it is this need that has made corporate governance so necessary today. Secondary data has been collected from 10 sample banks from 2014/15 to 2022/23 has been collected from various secondary sources like annual reports of sample banks and consolidated financial reports prepared by Nepal Rastra Bank. Descriptive statistics, correlation analysis and regressions analysis have been carried out to examine the secondary data. The performance measures like Return on Equity (ROE) and Return on Assets (ROA) of the banks have been used as the dependent variable while corporate governance variables like board size member (BM), earning per share (EPS), capital adequacy ratio (CAR), bank size (BS), bank age (BA), independent directors (ID) have been considered as independent variables in addition to which size and risks of the sample banks are included in the model as control variables. This study aims to analyse the relationship of corporate governance structure with performance of banks. Findings suggest that effective corporate governance mechanisms significantly enhance the performance of Nepalese banks by fostering investor confidence, reducing agency costs, and promoting sustainable growth. However, challenges such as regulatory compliance gaps, board independence issues, and transparency deficits also emerge as critical factors affecting governance quality and consequently, bank performance. Recommendations include enhancing board independence, improving transparency and accountability mechanisms, and aligning executive incentives with long-term performance objectives to sustainably enhance the performance of Nepalese banks amidst evolving economic and regulatory landscapes.