| Title : | The effect of ownership structure and corporate governance on performance of Nepalese banks | | Material Type: | printed text | | Authors: | Anshu Manandhar, Author | | Publication Date: | 2015 | | Pagination: | 87p | | Size: | GRP/Thesis | | Accompanying material: | 5/B | | General note: | Including bibilography | | Languages : | English | | Descriptors: | Banks
Banks and banking
Corporate governance
| | Keywords: | 'corporate governance corporations finance banks banks and banking commercial banks Nepal' | | Class number: | 658.42 | | Abstract: | Researchers over the last four decades believe that there is a connection between ownership structure and bank performance. There are many studies published to examine this relationship. The relationship between ownership structure and performance are studied extensively by several researchers. In regards to the relationship between ownership structure and profitability, researchers found different results. Some of the scholars state that, there is a country where ownership structure of banks affects positively to the profitability. Meanwhile, other researchers indicate the nonlinear negative or positive relationship of ownership structure and bank profitability
Corporate governance is a system by which companies are directed and controlled. Corporate governance is a way in which supplier of finance ensure themselves of getting return on their investment. Corporate governance is concerned with the ways and means by which the directors of the company are made responsible to its shareholders. Many companies have failed because of increasing corporate lootings. There is a doubt whether existing regulatory framework is adequate to deal with corporate fraud. Thus, in recent years, corporate governance has assumed a greater significance. This study on corporate governance and bank performance has been undertaken for Nepalese banks because Nepalese banking sector has gone sweeping changes and is emerging as a major sector of the economy.
The results in the prior studies on the effect of ownership structure, corporate governance on bank performance are mixed and unclear. Hence, this study has been conducted to get clear idea of effect of ownership structure, corporate governance on performance of Nepalese bank. For this, the sample of 21 commercial banks with data of 7 years from 2005/06 to 20012/13 has been taken. Data has been collected from various secondary sources like annual reports of sample banks and consolidated financial reports prepared by Nepal Rastra Bank. Descriptive statistics, portfolio analysis, correlation analysis, and ordinary least square regressions have been carried out to examine the secondary data.
The performance measures like Return on Equity (ROE), Return on Assets (ROA) and Tobin’s Q of the banks have been used as the dependent variable while ownership structure variables like institutional ownership, concentrated ownership, government ownership, foreign ownership and other ownership likewise, corporate governance variables such as board size, bank age, debt ratio and liquidity ratio have been considered as independent variables. Based on the results, independent variables like concentrated ownership, government ownership, foreign ownership, other ownership bank age and debt ratio and board size of the banks in Nepal are important ownership structure and corporate governance variables in order of their relative importance that enhances the performance of the banks. To be more specific, institutional ownership, concentrated ownership, foreign ownership and bank age are the independent variables that tend to influence the performance in positive manner. It implies that increase in any of these variables is likely to augment the performance of the banks. In contrast, more number of board members tends to deteriorate the performance. Moreover, higher percentage of government ownership, more share holdings by general public, and higher debt financing tends to the poor performance of bank. Concentrated ownership, foreign ownership, government ownership, other ownership, bank age, board size and debt ratio are found to have significant relation with bank performance. Institutional ownership and liquidity ratio are found to be insignificant in predicting the performance of the banks.
The recommendation put forward by this study is that banks are suggested to increase the proportion of foreign ownership and institutional ownership to have better performance. On the other hand, it is recommended to reduce the number of board members, use of more debt financing, more percentage of government and general public share holdings in order to have better performance of the banks. The major limitation of this study lies in the fact that this study has excluded some bank specific variables that might influence on performance evaluation of banks. The study remains enough ground for future researcher in the same topic. The future studies can be carried out by selecting other financial institutions like development banks, public banks and finance companies to grab the wider view of banks’ risk taking behavior and performance evaluation. Furthermore, the future studies can select larger sample and more number of observation years for the study that could lead to much more valid prediction regarding effect of ownership structure and corporate governance variables on performance of the banks. Moreover, this study has only used secondary data. So, the future studies can be done by using both primary and secondary data. |
The effect of ownership structure and corporate governance on performance of Nepalese banks [printed text] / Anshu Manandhar, Author . - 2015 . - 87p ; GRP/Thesis + 5/B. Including bibilography Languages : English | Descriptors: | Banks
Banks and banking
Corporate governance
| | Keywords: | 'corporate governance corporations finance banks banks and banking commercial banks Nepal' | | Class number: | 658.42 | | Abstract: | Researchers over the last four decades believe that there is a connection between ownership structure and bank performance. There are many studies published to examine this relationship. The relationship between ownership structure and performance are studied extensively by several researchers. In regards to the relationship between ownership structure and profitability, researchers found different results. Some of the scholars state that, there is a country where ownership structure of banks affects positively to the profitability. Meanwhile, other researchers indicate the nonlinear negative or positive relationship of ownership structure and bank profitability
Corporate governance is a system by which companies are directed and controlled. Corporate governance is a way in which supplier of finance ensure themselves of getting return on their investment. Corporate governance is concerned with the ways and means by which the directors of the company are made responsible to its shareholders. Many companies have failed because of increasing corporate lootings. There is a doubt whether existing regulatory framework is adequate to deal with corporate fraud. Thus, in recent years, corporate governance has assumed a greater significance. This study on corporate governance and bank performance has been undertaken for Nepalese banks because Nepalese banking sector has gone sweeping changes and is emerging as a major sector of the economy.
The results in the prior studies on the effect of ownership structure, corporate governance on bank performance are mixed and unclear. Hence, this study has been conducted to get clear idea of effect of ownership structure, corporate governance on performance of Nepalese bank. For this, the sample of 21 commercial banks with data of 7 years from 2005/06 to 20012/13 has been taken. Data has been collected from various secondary sources like annual reports of sample banks and consolidated financial reports prepared by Nepal Rastra Bank. Descriptive statistics, portfolio analysis, correlation analysis, and ordinary least square regressions have been carried out to examine the secondary data.
The performance measures like Return on Equity (ROE), Return on Assets (ROA) and Tobin’s Q of the banks have been used as the dependent variable while ownership structure variables like institutional ownership, concentrated ownership, government ownership, foreign ownership and other ownership likewise, corporate governance variables such as board size, bank age, debt ratio and liquidity ratio have been considered as independent variables. Based on the results, independent variables like concentrated ownership, government ownership, foreign ownership, other ownership bank age and debt ratio and board size of the banks in Nepal are important ownership structure and corporate governance variables in order of their relative importance that enhances the performance of the banks. To be more specific, institutional ownership, concentrated ownership, foreign ownership and bank age are the independent variables that tend to influence the performance in positive manner. It implies that increase in any of these variables is likely to augment the performance of the banks. In contrast, more number of board members tends to deteriorate the performance. Moreover, higher percentage of government ownership, more share holdings by general public, and higher debt financing tends to the poor performance of bank. Concentrated ownership, foreign ownership, government ownership, other ownership, bank age, board size and debt ratio are found to have significant relation with bank performance. Institutional ownership and liquidity ratio are found to be insignificant in predicting the performance of the banks.
The recommendation put forward by this study is that banks are suggested to increase the proportion of foreign ownership and institutional ownership to have better performance. On the other hand, it is recommended to reduce the number of board members, use of more debt financing, more percentage of government and general public share holdings in order to have better performance of the banks. The major limitation of this study lies in the fact that this study has excluded some bank specific variables that might influence on performance evaluation of banks. The study remains enough ground for future researcher in the same topic. The future studies can be carried out by selecting other financial institutions like development banks, public banks and finance companies to grab the wider view of banks’ risk taking behavior and performance evaluation. Furthermore, the future studies can select larger sample and more number of observation years for the study that could lead to much more valid prediction regarding effect of ownership structure and corporate governance variables on performance of the banks. Moreover, this study has only used secondary data. So, the future studies can be done by using both primary and secondary data. |
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