An empirical examination of the impact of country‐level corporate governance on profitability of Indian banks

Abstract

The main aim of the present study is to examine the impact of country-level corporate governance on the profitability of Indian banks using a sample of 61 banks that is, 42 private and 19 public banks. The study employs descriptive statistics, correlation analysis, regression analysis of two-way variable intercept random effect model, and robustness checks including robust regression, Generalized Methods of Moments, and Panel Correction Standard Error. The results reveal that country-level corporate governance has a significant impact on the profitability of Indian banks. Private banks demonstrate better performance over public banks and the effect of country-level governance on the profitability of private banks is positive and it is better than public banks. Further, the results show that demonetisation has a significant negative impact on the profitability of Indian banks as measured by Return on Assets and Return on Equity, but it also has a significant positive effect in the case of Net Interest Margin. The findings of the current study have considerable implications for regulators, policymakers, bankers, analysts, and academicians. Regulations and several policy measures could be introduced to improve the profitability of Indian banks. To promote greater transparency, better accountability, strong rule of law, and corporate governance, corruption must be eliminated to enhance higher profitability of Indian banks. This paper presents novel evidence linking country-level corporate governance to the profitability of banks in the context of India, as an emerging economy. Therefore, it bridges an existing gap in the body of literature on the profitability of banks in India.

Ethical commitment, institutional investors and financial performance: Malaysian evidence

“…Meanwhile, for an alternate performance measure, we followed Paltrinieri et al (2021) using risk‐adjusted performance (RAROA) as an alternative measure. RAROA were calculated by dividing the return on assets by the standard deviation of ROA (Almaqtari et al, 2022; Paltrinieri et al, 2021). Risk‐adjusted performance measures can capture companies' risk‐taking behaviour and determine whether ethical practises expose companies to higher risk (Di Tommaso & Thornton, 2020).…”

Performance and CEO duality in Indian public banks: a moderating role of board independence

“…Further, the study also incorporated the ratio of loan to total asset (LONTA) as a control variable which acts as a proxy for the liquidity of the Indian public banks, as high-liquid banks have enough capital to deal with the unexpected loss (Arayssi and Jizi, 2019;Ngatno et al, 2021). Lastly, the study includes return on assets (ROA) which represents the level of performance of Indian public banks, this variable was used in the prior literature on governance as a proxy for business performance (Almaqtari et al, 2022;Gupta and Mahakud, 2021;Hunjra et al, 2020;Khan et al, 2020;Kumar and Sudesh, 2019). Table 1 summarises the information related to the various attributes considered.…”

Prediction of Banks Efficiency Using Feature Selection Method: Comparison between Selected Machine Learning Models

“…e importance of corporate governance as good management practices in the banking sector is similarly investigated [30][31][32]. However, few scholars emphasize corporate social responsibility (CSR) as one of the governance and managerial practices affecting banks' efficiency.…”