CORPORATE GOVERNANCE AND FIRM PERFORMANCE

Abstract

Corporate governance refers to the dynamics among shareholders, the board of directors, and top management in determining a corporation's performance and strategic direction. It also includes the relationships with stakeholders and the guiding objectives for governance. This study primarily aims to identify the dimensions that represent corporate governance and banking performance, and to explore the relationship between them. Specifically, it seeks to analyze how corporate governance influences the performance of commercial banks in Nepal. A descriptive and informal research design was utilized for this study, along with a causal research design to elucidate the relationships between various variables and their causes. The survey includes 20 commercial banks, with 10 selected for the study. Findings indicate that board size, earnings per share, and the presence of female directors negatively influence ROA and ROE. While board size shows statistical significance, earnings per share and the number of female directors do not. Additionally, ethnic group and the capital adequacy ratio positively affect ROA and ROE, with the latter demonstrating a statistically significant positive impact on performance. Therefore, the ethnic group is also significant. Consequently, a linear relationship exists between ROA, ROE, and the factors of board size, earnings per share, ethnic group, capital adequacy ratio, and female directors.