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 financial performance variables. Board member size, number of female directors, bank size, capital adequacy ratio and leverage were taken as independent variables whereas return on equity and return on assets were taken as dependent variables. The study was conducted among 4 commercial banks of Nepal. The data were collected from the annual reports of the banks and NRB Banking and Financial Statistics Report. Correlation and regression analysis was used to determine the relationship and level of significance. Larger banks generally achieve higher ROA and ROE, indicating better profitability with increased size. Conversely, a higher capital adequacy ratio is associated with lower ROA and ROE, suggesting that a stronger capital base reduces profitability. Additionally, the presence of female directors correlates negatively with ROA and ROE, reflecting potential challenges in profitability. While larger banks positively impact ROE, higher leverage negatively affects it, indicating that increased debt reduces returns on equity.