International Journal of Modern Research in Engineering & Management (IJMREM) ||Volume|| 1||Issue|| 7 ||Pages|| 41-51 || July 2018|| ISSN: 2581-4540
Corporate Governance and Its Impact on Financial Performance in Nepalese Commercial Banks Dr. Achyut Gnawali Associate Professor at Central Department of Management, Tribhuvan University, Kirtipur, Kathmandu.
------------------------------------------------------ABSTRACT---------------------------------------------------Corporate governance is about building credibility, ensuring transparency and accountability as well as maintaining aneffective channel of information disclosure that would foster good corporate performance. Corporate governance is the extent to which companies are run in an open and honest manner is important for overall market confidence. Corporate governance describes all of the devices, institutions, and mechanisms by which corporations are governed. The basic objective of the study is to analyze the level and structure of corporate governance in Nepal and determine its effects on financial performance in commercial banks of Nepal. Descriptive research design has been followed and multistage sampling method is used. Both primary as well as secondary data have been used to collect the information. It is found that corporate governance has played the significant role to keep the corporate governance in Nepalese commercial Banks.
KEY WORDS: Corporate Governance, Audit Committee, Ownership, Banking Institutions, Financial Performance -------------------------------------------------------------------------------------------------- ------------------------------------Date of Submission: Date, 29 July 2018 Date of Accepted: 04August 2018 ----------------------------------------------------------------------------------------------------------------------------- ----------
I.
INTRODUCTION
Corporate Governance is a pivotal issue now-a-days in the world. Corporate Governance refers to the set of rules and incentives by which the management of company is directed and controlled and it refers to the way rights and responsibilities are distributed among the board, company management, shareholders and other stakeholder. However, policies and documentations are of undeniable importance, these are not enough to ensure good governance. The action of companies toward promoting corporate transparency and accountability speak than words. Corporate governance involves both internal and external mechanism. The internal mechanisms are concerned with the size and composition of the board of directors and external mechanisms are concerned with the influence of stock holder, the functioning of the markets for corporate control (Chen & Lee, 2008). Corporate governance basically explains the ways how a corporate firm is managed, controlled and directed. It is set of rules and indicatives which management of a company is directed and controlled so as to maximize profit and value of the company. It specifies how the rights and duties are being distributed among the several stakeholders of the firm. All these are essentially aimed at improving board independence, transparency and accountability to the company’s shareholders and other stakeholders and its effectiveness in fulfilling both its performance and functions (Andres &Vallelado, 2008). Banks have a vital function in the economy. They have easy excess to funds through collecting savers money, issuing debt securities or borrowing on the inter-banks markets. The funds collected are invested in short term and long-term assets, which consists mainly of credits to various economic actors (individuals, companies, government, etc). Commercial banks are the heart; maintaining the blood supply of our modern capitalist societies (Andre &Vallelado, 2008). Nepal, being a developing economy, and in transitory period after peace pact with Maoist, has been suffering from instable political environment and because of which the development in the field of law and order, Corporate Governance, Industrial Development are not in good state of affairs. The study has been also focusing the Corporate Governance practices and its impact. Hence the study has mainly focused on following issues: 1. What is the present scenario of corporate governance compliance of commercial banks in Nepal? 2. Is there any effects of Corporate Governance on Return on Assets (ROA) and Return on Equity (ROE)? II. OBJECTIVES OF THE STUDY The basic objective of the study is to analyze the level and structure of corporate governance and determine its impact on financial performance in commercial banks in Nepal. The specific objectives of this study are as follow:
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Corporate Governance and Its Impact on Financial Performance… 1. 2.
To explore the present scenario of corporate governance compliance of commercial banks in Nepal. To examine the impact of Corporate Governance on Return on Assets (ROA) and Return on Equity (ROE).
III. REVIEW OF LITERATURE The empirical studies concerned to Corporate Governance and firm financial performance is the most controversial issues normally faced by policy makers now-a -days (Andersson, 2000). The corporate Governance literature is a dynamic aspect and largely expending and there is not any model and theory of Corporate Governance and firm financial performance which could be applicable to all the firms (John &Senbet, 1998).Agrawal and Knoeber (1996) define corporate governance as a system which has dual mechanism to control organizations; it can be external mechanism and internal mechanism. Outsiders define the external mechanism like shareholding policy and outside block holding etc. Firm’s decision makers (top management) decide the internal mechanisms like size of board, remunerations and other internal policies. Whenever people get close to each other to comprehend the societal and organizational need they must have direction and control. To govern is to give them direction and control by providing them proper laws and regulations (Serrat, 2011). Berle and Means (1932) specifies corporate governance as, it is regulation, ownership and control of the organization. Contributing on the same literature the (Meisel, 2004) has broadly defines Corporate Governance as “a set of relationship between company’s board, its shareholders and other stakeholders. It also provides the structure, through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determine”. On the similar way (Solomon & Solomon, 2004) stated “the system of checks and balances, both internal and external to companies, which ensures that companies discharge their accountability to all their stakeholders and act in socially responsible way in all areas of their business activities”. Nepal Rasta Bank, the central bank of Nepal is playing the major role in the governance of banking institutions Nepal. Since the banks are of unique nature institutions and outcome of company as well as Banking and Financial Institution Act, they are quite different with dreading, service and manufacturing undertakings. The corporate governance has different theories like Agency Theory, Stakeholders Theory, Stewardship Theory and transaction cost economies theory which to create corporate governance in the organizations. Croucher and Miles (2010), indicates that Anglo American model is based on normative free market’ principles, relies on various pre-requisites for its successful operation, guides about corporate governance that it has focused on the association between company directors and shareholders. The Corporate Governance position depicted by higher rank shows the better Corporate Governance compliance of the organization. There is not any unified formal code of Corporate Governance except NRB provisions of Good Governance concerned to Banking and Financial Institutions in Nepal. Company Act, Security Act, BAFIA are some major sources of Governance along with regulatory bodies. The regulatory authorities directly accountable to stakeholders regulate the company with the help of various Acts, Rules and Provisions. Corporate Governance and company performance is a well debated study area of recent research. It is widely believed that good corporate governance is an important factor in improving the value of a firm in developing and developed markets. However, the relationship between CG and the financial performance of a firm differs in developing and developed financial markets due to disparate CG structures in these markets resulting from dissimilar social, economic and regulatory condition in these countries. Before looking at the relationship between corporate governance and firm’s performance, it is useful to have a framework with which to understand how corporate governance can affect firm behavior and economic performance. One of the problems with the current debate on CG is that there are many different, and often conflicting, views on nature and affect firm behavior and economic performance. The study of (Junarsin, 2011) empirically finds by proving performance with two measures: ROA, and ROE.In general, almost all studies are able to establish the relationship between governance practices and firms’ performance. Conceptual Framework: The theoretical frame work of study by depicting the influence of corporate governance on firms’ performance. This framework indicates corporate governance as Independent variable and firms’ performance as dependent variable. Transparency, Interdependency, Accountability, Fairness, Social Awareness, Discipline and Responsibility are dimensions to measure the corporate governance as a construct variable. The dimension of the corporate governance was adopted from Credit Lyonnais Securities Asia (CLSA).
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Corporate Governance and Its Impact on Financial Performance… Transparency
Interdependency
Accountability
Financial Performance
Fairness
Social Awareness
Discipline
Responsibility
Figure:1 IV.
RESEARCH METHODOLOGY
The research is explanatory in nature. A multistage sampling technique was applied for the determination of the sample. As, there were 28 banks at the time of the study. Out of these 28 banks only 17 numbers of banks were established before 2002. The selection of the bank for the study was framed on the basis of ten years in operations. Furthermore, six earliest established Nepalese commercial banks were selected for the study. These banks were established between 1937 and 1993. This stratification of population resulted into sampling frame of six banks namely, Nepal Bank Ltd. Kathmandu (1937), Rastriya Banijya Bank Ltd. Kathmandu (1966), Nabil Bank Ltd. Kathmandu (1984), Nepal Investment Bank Ltd. Kathmandu (1986), Standard Chartered Ltd. Kathmandu (1986), and Himalayan Bank Ltd. Kathmandu (1993). However, one bank ADB was a pseudo commercial bank; hence it was not considered for the study. Questionnaire to measure the corporate governance and organizational success have been adopted from Credit Lyonnais Securities Asia (CLSA). This questionnaire includes 37 questions to measure the corporate governance. This study uses six point Likert scale questionnaire. Questionnaires for this study were handed out to employees of the sampled bank located in Kathmandu valley. The response rate is 68%. That is, the number of respondents surveyed was 360, among which the response rate was 68 percent i.e. 245 responded, out of 240 responded were utilized in the study, after eliminating the responses of Rastriya Banijya Bank. Reliability and Validity: The result of reliability test is 0.934 for 37 items of corporate governance. The result of the reliability test is shown in Table 1. Table 1: Cronbach’s Alpha Coefficients S. No. 1
Variables Corporate Governance
Cronbach’s Alpha 0.934
Number of items 37
Presentation and Analysis of Data :For presentation of data, SPSS, and MS-Excel were also used. Similarly, several graphical tools such as tables have been used. Mean and standard deviation is used to see the position of corporate governance in commercial banks of Nepal. Correlation matrix is carried out to see the relationship
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Corporate Governance and Its Impact on Financial Performance… between the corporate governance and firm’s performance and followed by regression analysis to see the impact of corporate governance and firm’s performance. Descriptive Analysis: In order to present descriptive scores for each of the variables used in the survey, descriptive analyses were performed. The main aim of this analysis is to describe the importance of each variable in order of importance given to it by the survey respondents. Descriptive statistics summarizes the sample and observations that have been made. In this study, descriptive analysis incorporates the calculation such as mean and standard deviation. Status of corporate governance in the selected commercial banks Himalayan Bank Ltd.: The analysis of descriptive findings showed that among various dimension of corporate governance of Himalayan bank ltd. has the mean value of 4.49, SD=0.610, which shows that the corporate governance is at the slightly agreeableness of the respondents. That indicates that the banks do comply with the corporate governance in moderate level. The dimension of discipline has the highest mean value of 5.22 with SD=0.712, which indicates that the Himalayan Bank Ltd. emphasized in discipline. However, accountability has the lowest mean value of 3.85 with SD=1.172, that shows a weakest part of the corporate governance of the bank. Table 2. Status of corporate governance in Himalayan Bank Ltd.
Variables
N
Mean
Std. Deviation
Discipline Transparency Independence Accountability Responsibility Fairness Social Awareness
46 46 46 46 46 46 46
5.22 4.46 4.26 3.85 4.24 4.60 4.77
0.712 0.764 0.864 1.172 0.906 0.657 1.068
Corporate Governance
46
4.49
0.610
NABIL Bank Ltd.: The analysis of descriptive findings showed that among various dimension of corporate governance of NABIL bank ltd. has the mean value of 4.47, SD=0.725, which shows that the corporate governance is at the slightly agreeableness of the respondents. That indicates that the banks do comply with the corporate governance in moderate level. The dimension of discipline has the highest mean value of 5.40 with SD=0.725, which indicates that the NABIL Bank Ltd. emphasized in discipline. However, accountability has the lowest mean value of 3.46 with SD=1.113, that shows a weakest part of the corporate governance of the bank. Table 3. Status of corporate governance in NABIL Bank Ltd. Variables
N
Mean
Std. Deviation
Discipline Transparency Independence Accountability Responsibility Fairness Social Awareness
49 49 49 49 49 49 49
5.40 4.55 4.16 3.46 4.21 4.53 4.95
0.725 0.924 0.929 1.113 1.080 1.003 1.261
Corporate Governance
49
4.47
0.759
Nepal Bank Ltd.: The analysis of descriptive findings showed that among various dimension of corporate governance of Nepal bank ltd. has the mean value of 4.45, SD=0.570, which shows that the corporate
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Corporate Governance and Its Impact on Financial Performance‌ governance is at the slightly agreeableness of the respondents. That indicates that the banks do comply with the corporate governance in moderate level. The dimension of discipline has the highest mean value of 5.23 with SD=0.621, which indicates that the Nepal Bank Ltd. emphasized in discipline. However, accountability has the lowest mean value of 3.30 with SD=1.902, that shows a weakest part of the corporate governance of the bank. In consequence, there is not much impact of the corporate governance in the Nepal bank ltd. Table 4. Status of corporate governance in Nepal Bank Ltd.
Variables
N
Mean
Std. Deviation
Discipline Transparency Independence Accountability Responsibility Fairness Social Awareness
53 53 53 53 53 53 53
5.23 4.53 4.33 3.30 4.14 4.50 5.13
0.621 0.750 0.814 1.092 0.897 0.748 0.957
Corporate Governance
53
4.45
0.570
Nepal Investment Bank Ltd.: The analysis of descriptive findings showed that among various dimension of corporate governance of Nepal investment bank ltd. has the mean value of 4.27, SD=0.906, which shows that the corporate governance is at the slightly agreeableness of the respondents. That indicates that the banks do comply with the corporate governance in moderate level. The dimension of discipline has the highest mean value of 5.19 with SD=0.954, which indicates that the Nepal Investment Bank Ltd. emphasized in discipline. However, accountability has the lowest mean value of 3.41 with SD=1.282, that shows a weakest part of the corporate governance of the bank. In consequence, there is not much impact of the corporate governance in the Nepal investment bank ltd. Table 5. Status of corporate governance in Nepal Investment Bank Ltd. Variables Discipline Transparency Independence Accountability Responsibility Fairness Social Awareness
N 51 51 51 51 51 51 51
Mean 5.19 4.26 4.02 3.41 3.94 4.45 4.60
Std. Deviation 0.954 1.069 1.219 1.282 1.255 1.054 1.532
Corporate Governance
51
4.27
0.906
Standard Chartered Bank Ltd.: The analysis of descriptive findings showed that among various dimension of corporate governance of Standard Chartered Bank Ltd. has the mean value of 4.42, SD=0.539, which shows that the corporate governance is at the slightly agreeableness of the respondents. That indicates that the banks do comply with the corporate governance in moderate level. The dimension of discipline has the highest mean value of 5.27 with SD=0.837, which indicates that the Standard Chartered Bank Ltd. emphasized in discipline. However, accountability has the lowest mean value of 3.32 with SD=1.119, that shows a weakest part of the corporate governance of the bank. In consequence, there is not much impact of the corporate governance in the Standard Chartered Bank Ltd.
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Corporate Governance and Its Impact on Financial Performance… Table 6. Status of corporate governance in Standard Chartered Bank Ltd. Variables
N
Mean
Std. Deviation
Discipline
41
5.27
0.837
Transparency Independence Accountability Responsibility Fairness Social Awareness
41 41 41 41 41 41
4.67 4.15 3.32 4.07 4.52 4.94
0.741 0.904 1.119 0.898 0.723 1.082
Corporate Governance
41
4.42
0.539
Overall selected commercial banks: The analysis of descriptive findings showed that among various dimension of corporate governance of selected commercial bank has the mean value of 4.42, SD=0.695, which shows that the corporate governance is at the slightly agreeableness of the respondents. That indicates that the Nepalese commercial banks do comply with the corporate governance in moderate level.The dimension of discipline has the highest mean value of 5.26 with SD=0.774, which indicates that the Nepalese Commercial Banks emphasized in discipline. However, accountability has the lowest mean value of 3.32 with SD=1.119, that shows a weakest part of the corporate governance of the Nepalese Commercial Banks. The status corporate governance is not so encouraging in the Nepalese Commercial Banks. Table 7. Status of corporate governance in Nepalese Commercial Banks
Variables
N
Mean
Std. Deviation
Discipline
240
5.26
0.774
Transparency Independence Accountability Responsibility Fairness Social Awareness
240 240 240 240 240 240
4.49 4.19 3.47 4.12 4.52 4.88
0.868 0.958 1.166 1.020 0.853 1.207
Corporate Governance
240
4.42
0.695
Relationship between Corporate Governance and Financial Performance:Correlations Analysis between variables were studied to find relations among them. Pearson’s correlations analysis was carried out for variables having simple multi option answers. Correlation matrix was computed to assess the extent or degree of relationship in between the research variables. Relationship between Corporate Governance and Return on Asset (ROA) :The Pearson Correlation coefficient between the independent variable ‘Corporate Governance’ and dependent variable ‘Return on Assets’ is r=0.433, p=0.006, which implies that the two variables are correlated. The p value is significant because of p<0.01.
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Corporate Governance and Its Impact on Financial Performance… Table 9. Return on Assets and corporate governance of the selected banks Years Banks Nepal Bank Ltd. NABIL Bank Ltd. Nepal Investment Bank Standard Chartered Bank Himalayan Bank Ltd.
2011
2012
2013
2014
2015
2016
Average
0.25 2.31 2.02 2.55 1.91
0.3 2.69 1.58 2.8 1.76
1.07 3.03 2.62 2.67 15.44
0.92 25.82 2.25 2.51 1.3
0.55 1.81 1.88 1.99 1.34
2.79 2.21 1.97 1.98 1.94
0.98 6.31 2.05 2.42 3.95
Corporate Governance 4.45 4.47 4.26 4.41 4.48
Table 10. Correlation matrix between corporate governance and Return on Assets of the selected banks Variables Corporate Governance (CG)
CG Pearson Correlation
ROA 1
.433
Sig. (2-tailed)
.006
N Return on Equity (ROE)
5
5
Pearson Correlation
.433
1
Sig. (2-tailed) N
.006 5
5
Relationship between Corporate Governance and Return on Equity (ROE) :The Pearson Correlation coefficient between the independent variable ‘Corporate Governance’ and dependent variable ‘Return on Equity’ is r=0.865, p=0.001, which implies that the two variables are correlated. The p value is significant because of p<0.01. Table 11. Return on Equity (ROE) and Corporate Governance of the selected banks Years Banks
Corporate Governance
2011
2012
2013
2014
2015
2016
Average
Himalayan Bank
33.74
9.95
20.32
11.09
7.48
44.59
21.2
4.45
NABIL Bank Ltd. Nepal Bank Ltd.
66.22 39.07
69.81 27.6
72.85 46.2
637.57 40.67
44.03 30.92
45.59 29.3
156.01 35.63
4.47 4.26
Nepal Investment Bank Ltd.
69.51
63.13
59.72
59.51
45.91
34.47
55.38
4.41
Standard Chartered Bank
37.21
34.73
32.56
28.78
24.72
33.1
31.85
4.48
Table 12. Correlation matrix between corporate governance and Return on Equity of the selected banks Variables Corporate Governance (CG) Return on Equity (ROE)
CG
ROE
Pearson Correlation Sig. (2-tailed)
1
N Pearson Correlation Sig. (2-tailed)
5 .865
.865 .001 5 1
.001
N
5
5
Regression Analysis: The deeper understanding of the impact of corporate governance on ROA and ROE, the regression analysis is conducted.
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Corporate Governance and Its Impact on Financial Performance… Impact of corporate governance on ROA: This section determines corporate governance explains variability in the outcome that is ROA. Linear regression was used to explore the impact of independent variables. Linear Regression Model Ŷ= α + β1X1+ ei. Where, Ŷ = ROA (Dependent variable) X1 = Corporate Governance α = Constant βi = Coefficient of slope of regression model ei = Error term Table 13below indicates the findings of regression analysis between corporate governance with ROA. Table 13: Model Summary Model Summary
Model 1
R .433
R Square a
.387
Adjusted R Square
Std. Error of the Estimate
.284
1.15081
a. Predictors: (Constant), CG Model summary indicates the R- square also known as coefficient of determination which can help in explaining variance. The value of R-square value as evident from Table 13 is 0.387 which means 38.7% variation in ROA is explained by corporate governance. Similarly, adjusted R-square is 0.284 which means 28.4% variation in ROA is explained by corporate governance. This shows moderate relationship between all variables of corporate governance and ROA. Model summary also indicates the standard error of the estimate of 1.15. Table 14: Coefficients Coefficients Unstandardized Coefficients Model B Std. Error 1 (Constant) 1.064 .272 CG .244 .070 a. Dependent Variable: ROA
Standardized Coefficients Beta .245
t 3.916 3.474
Sig. .001 .046
Taking corporate governance (X1) and ROA as the dependent variable, the model is constructed with equation as below: Ŷ= α + β1X1+ ei. Based on the coefficients, the regression equation written as: Ŷ = 1.064+0.244X1. Regression coefficient of Corporate Governance is 0.244, that is Corporate Governance can explain 24.4% to ROA. 2. Impact of corporate governance on ROE This section determines corporate governance explains variability in the outcome that is ROE. Linear regression was used to explore the impact of independent variables. Linear Regression Model Ŷ= α + β1X1+ ei. Where, Ŷ = ROE (Dependent variable) X1 = Corporate Governance α = Constant βi = Coefficient of slope of regression model ei = Error term
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Corporate Governance and Its Impact on Financial Performance… Table 15. below indicate the findings of regression analysis between corporate governance with ROE. Table 15: Model Summary Model Summary Model 1
R R Square .506a .411 a. Predictors: (Constant), CG
Adjusted R Square
Std. Error of the Estimate .318
.23253
Model summary indicates the R- square also known as coefficient of determination which can help in explaining variance. The value of R-square value as evident from Table 15 is 0.411 which means 41.1% variation in ROE is explained by corporate governance. Similarly, adjusted R-square is 0.318 which means 31.8% variation in ROE is explained by corporate governance. This shows moderate relationship between all variables of corporate governance and ROE. Model summary also indicates the standard error of the estimate of .23. Table 16: Coefficients Coefficientsa Unstandardized Coefficients Standardized Coefficients Model B Std. Error Beta t Sig. 1 (Constant) 3.658 92.780 .147 .003 CG .442 360.301 .106 .184 .005 a. Dependent Variable: ROE Taking corporate governance (X1) and ROE as the dependent variable, the model is constructed with equation as below: Ŷ= α + β1X1+ ei. Based on the coefficients, the regression equation written as: Ŷ = 3.658+0.442X1. Regression coefficient of Corporate Governance is 0.442, that is Corporate Governance can explain 44.2% to ROE.
V.
DISCUSSION AND CONCLUSION
This research paper infers that corporate governance has become surprisingly the emerging concept in rising and competitive markets. This concept has also become a constraint in the innovative and emerging market to adopt readily changes in market. Commercial banks have sensitive customers so they have to focal point on corporate governance for its long-term success. The corporate governance mechanisms in the Nepalese Commercial Banks are normally thought to be less important to achieve banks’ financial performance. In this research used six-point Likert scale questionnaire to measure the corporate governance in Nepalese Commercial Banks. This empirical study suggests that the corporate governance has widespread role in firms’ performance. The results suggest that Transparency, Interdependence, Accountability, Fairness, Social Awareness, Discipline and Responsibility have significant effect on banks’ financial performance. This result supports few previous studies such as Miles, L. (2010), Javid, & Iqbal, (2010).), Javid, & Iqbal, (2010) who concluded with performance has a link with corporate governance. Similarly, indications can be found in study of (Mungule, 2005) in support that discipline is one of major contributor in organizational success. The result of Mungule (2005) is also supported with the present research. As, it is found that Nepalese Commercial Banks emphasized on discipline components very much then that of the other dimensions of the corporate governance. Empirical findings of this study in concert with direction of corporate governance which force the importance of accounting standards being part of discipline in organizations, this study has also proven that discipline is most important and viable variable for banking sectors organizations to be succeeded. The result of this research also supports, Bridge, (2008), Miles, (2010) and Deakin, S. Hobbs, R, et.al. (2005), Ananchotikul, Nasha (2008), Black et. al. (2003), Klapper and Love (2002) and Khanna et. Al. (2001), who specifies corporate governance as, it is discipline, transparency, regulation, ownership and control of the organization.
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Corporate Governance and Its Impact on Financial Performance… To avail the maximum organizational benefits corporate governance sets legal terms and condition for the allotment of property rights among stakeholders, organizing their associations and manipulating their incentives for achieving their eager to work together. Further addition to corporate governance it is vital because of the delegation of responsibility for production, process improvement and innovation. (Konzelmann, Conway, Shleifer, &Vishny2006). Mwanakatwe, C. (2005) also noted that corporate governance is more crucial in banking industry because of its role being the custodian of public funds due to high leverage of responsibility banks are more accountable.Thus, it may be concluded that there is no difference in corporate governance practice in different commercial banks in Nepal. It is also concluded that there is a strong positive relationship in between the corporate governance and firms’ financial performance (ROA & ROE). Likewise, there is a positive impact of corporate governance and firms’ financial performance (ROA & ROE).There are around 40-50 legislation related to corporate governance framework in Nepalese context. Among them more applicable are company act 2063, Bank and financial act 2063,NRB directives to BFIs,Insurance Board directives to insurance companies, Securities registration and issuance rules 2065, for listed companies in NEPSE.Similarly Sushasan Act 2064,Anti –corruption act 2059 and other related institutions for corporate governance are Transparency International, Nepal Chapter,Commission for Investigation of authority abuse of authority(CIAA) National Vigilance Center, Hello Sarkar karyakrametc. are the milestone in the field of CG in Nepal.There is lack of research works in this field especially in developing countries like Nepal but adequate research works had been carried out in developed countries. Executive (Chief executive) Legislature (BOD and Annual GM) and the judiciary (Audit and internal control) systems of the organization should be efficient to keep an Institute within the good corporate governance systems. Future research implication: With this research on the relationship between corporate governance practice and organizational performance, this area is ripe for future research. There are several significant issues to be considered for future research. Among potential topics is the notion of how corporate governance practices and organizational performance in manufacturing sectors or other service sectors can be undertaken for further exploring the subject phenomenon. In order to improve the future study, the sample size could be collected from the manufacturing firms across in Nepal. This can further be compared to the service industries including the banking sector. The researcher also believes that extensive study with larger and more representative sample is important to give more generalized picture of the work activities performed by corporate governance practice as well as the development of corporate governance strategy in Nepalese context. Therefore, the new findings of manufacturing sector can give a new direction in understanding the subject phenomenon.Further research might be carried out with more sample of banks. It may give new understanding the subject phenomenon. Furthermore, other moderating variables of organizational performance can be explored further to understand the relationship between corporate governance and organizational performance variables.Last but not the least, the next few years are likely to see increased global competitiveness in the Nepalese business environment, and the banking sector will also mature in terms of operational years. Therefore, it would be interesting to expand the survey to provide longitudinal survey of corporate governance practices documenting changes overtime in the adoption of strategy and significant influence of the performance of the banks.
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Dr. Achyut Gnawali, Corporate Governance and Its Impact on Financial Performance in Nepalese Commercial Banks. International Journal of Modern Research in Engineering & Management (IJMREM), 1(7), 41-45. Retrieved August 10, 2018, from www.ijmrem.com. www.ijmrem.com
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