Corporate Governance Practices and Non-performing Loans of Banking Sector of Bangladesh: A Panel Data Analysis

2019 ◽  
Vol 9 (2) ◽  
pp. 12
Author(s):  
Asia Khatun ◽  
Ratan Ghosh
Keyword(s):  
Corporate Governance ◽  
Commercial Banks ◽  
Banking Sector ◽  
Good Governance ◽  
Panel Data Analysis ◽  
Random Effect ◽  
Developed Countries ◽  
Governance Practices ◽  
Code Of Corporate Governance

This paper tries to inspect the association and relationship between corporate governance determinants and level of non-performing loan (NPL) of listed commercial banks in Bangladesh. Recently Banks are facing a problem of default loan. This default loan or NPL may reduce the loan giving capacity of the Banks and it may decrease the economic growth of a country. Moreover, there is less research to find out the implication of good governance on the level of NPL in banking sector of Bangladesh than that of developed countries. Here, data from thirty listed commercial banks for the year 2008-2017 (10 years) are taken to explore the rapport between the corporate governance variables and NPL. Random Effect GLS regression method is used to analyze the data. Findings told that commercial banks follow the code of corporate governance on a comply basis however their relationship with NPL is positively significant within the taken determinants of corporate governance. It is expected that, banks with good quality management may ensure the quality of loan and it will reduce the level of NPL.

Is internal and external mechanism of governance enriching the performance of the banking sector of Pakistan?

2017 ◽  
Vol 17 (4) ◽  
pp. 629-642 ◽  
Author(s):  
Sundas Sohail ◽  
Farhat Rasul ◽  
Ummara Fatima
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Good Governance ◽  
Random Effect ◽  
Random Effect Model ◽  
General Meeting ◽  
Governance Structure ◽  
Board Structure ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to explore how governance mechanisms (internal and external) enhance the performance of the return on asset (ROA), return on equity (ROE), earning per share (EPS) and dividend payout ratios (DP) of the banks of Pakistan. The study incorporates not only the internal factors of governance (board size, out-ratio, annual general meeting, managerial ownership, institutional ownership, block holder stock ownership and financial transparency) but also the external factors (legal infrastructure and protection of minority shareholders, and the market for corporate control). Design/methodology/approach The sample size of the study consists of 30 banks (public, private and specialized) listed at the Pakistan Stock Exchange (PSE) for the period 2008-2014. The panel data techniques (fixed or random effect model) have been used for the empirical analysis after verification by Hausman (1978) test. Findings The results revealed that not only do the internal mechanisms of governance enhance the performance of the banking sector of Pakistan but external governance also plays a substantial role in enriching the performance. The findings conclude that for a good governance structure, both internal and external mechanisms are equally important, to accelerate the performance of the banking sector. Research limitations/implications Internal and external mechanisms of corporate governance can also be checked by adding some more variables (ownership i.e. foreign, female and family as internal and auditor as external), but they are not added in this work due to data unavailability. Practical implications The study contributes to the literature and could be useful for the policy makers who need to force banks to mandate codes of governance through which they can create an efficient board structure and augment the performance. The investments from different forms of ownership can be accelerated if they follow the codes properly. Social implications The study facilitates the bankers in incorporating sound codes of corporate governance to enhance the performance of the banks. Originality/value This work is unique as no one has explored the impact of external mechanism of governance on the performance of the banking sector of Pakistan.

scholarly journals Corporate governance practices in the banking sector of Bangladesh: do they really matter?

2017 ◽  
Vol 12 (1) ◽  
pp. 27-35 ◽  
Author(s):  
Samiul Parvez Ahmed ◽  
Rahatul Zannat ◽  
Sarwar Uddin Ahmed
Keyword(s):  
Corporate Governance ◽  
Commercial Banks ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Stock Exchange ◽  
Financial Sector ◽  
Jel Classification ◽  
Data Availability ◽  
Time Period ◽  
Governance Practices

A well governed institution is expected to use its resources optimally and, thus, perform more efficiently and contribute positively to economic development of a nation. However, often, it can be seen that poor management of the stakeholders leads to less than optimal strategic directions for an institution. Due to recent global financial crisis and rising issues of the Bangladeshi banking sector, corporate governance is one of the factors that have gained considerable attention. Recent drive of the governance issues of the banking sector of Bangladesh is expected to bring positive change in the financial sector and, hence, it is crucial to assess whether complying with governance codes leads to desired outcome or not. Specifically, the main purpose of this study is to examine the relationship between performances of commercial banks with corporate governance factor along with some internal and macroeconomic variables. Thus, the listed commercial banks in the Dhaka Stock Exchange (DSE) of Bangladesh were considered for the study. Subsequently, considering data availability of the time period (2011-2014), 29 listed commercial banks in the DSE have been considered and, hence, Ordinary Least Squared (OLS) regression models were used through Eviews 8.0 for analyzing the data. Though the study shows a positive relation between corporate governance and performances of banks, the statistical insignificance of the relation raises concern regarding various issues of corporate governance in the financial sector of Bangladesh. Keywords: corporate governance, financial institutions, performances of commercial banks. JEL Classification: G21, G30, G38, G39, O16

Corporate Governance Mechanisms in Commercial Banks of Nepal

2020 ◽  
Vol 9 (1) ◽  
pp. 120-134
Author(s):  
Ravindra Prasad Baral
Keyword(s):  
Corporate Governance ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Banking Sector ◽  
System Stability ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Governance Practices ◽  
Transparency And Disclosure ◽  
Director Independence

Corporate governance in banking sector has received great attention among policymakers, practitioners and academicians in Nepal due to governance failures in some financial institutions in recent period. This study attempts to examine the corporate governance mechanisms adopted by Nepalese commercial banks by using a panel data of 30 commercial banks from 2012 to 2016. The internal corporate governance mechanisms are board structure and composition, board committees, director independence, transparency and disclosure, director remuneration, and shareholders rights. The study employs ANOVA test to examine differences in corporate governance mechanisms among state-owned, joint venture, and domestic banks. The study findings reveal that the corporate governance practices in financial institutions of Nepal is somewhat satisfactory; however, significant improvements are required especially in case of state-owned banks and local private banks. In order to achieve the policy of government of Nepal to enhance financial system stability, one of the major areas for policy focus should be to promote enhancement of corporate governance standards in the financial institutions as the stability of the banking sector depends largely on corporate governance practices they adopt. Promoting director independence, improving transparency and disclosure, and enhancing shareholders’ right are found to be important for improving standard of corporate governance in Nepal.

scholarly journals The role of board of commissioners and transparency in improving bank operational efficiency and profitability

2014 ◽  
Vol 17 (1) ◽  
pp. 81 ◽  
Author(s):  
Lutfi Lutfi ◽  
Meliza Silvy ◽  
Rr. Iramani
Keyword(s):  
Corporate Governance ◽  
Statistical Analysis ◽  
Commercial Banks ◽  
Good Governance ◽  
Random Effect ◽  
Operational Efficiency ◽  
Critical Aspect ◽  
Financial Condition ◽  
Good Corporate Governance

Good corporate governance is a critical aspect in banking industries because the larg- est part of the source of funds is from public. Two of the important aspects of good corporate governance are the role of the board of commissioners and transparency. This study aimed to assess the effect of the implementation of good governance, which is proxied by the role of the board of commissioners and transparency of financial and non-financial condition, toward the operational efficiency and profitability of the na- tional commercial banks in Indonesia. This study uses data of thirty six banks for five years, from 2008 to 2012. Random effect panel data technique is used to analyze the data since this technique can increase the power of statistical analysis. The results shows that in terms of efficiency only board that functions well capable of improving the operational efficiency of the banks. As for profitability, both good board of commis- sioners and public transparency are capable of increasing the bank operational profit- ability in Indonesia.

scholarly journals Concentração de propriedade e qualidade da governança da empresa brasileira

2015 ◽  
Vol 13 (3) ◽  
pp. 438 ◽  
Author(s):  
Isac De Freitas Brandão ◽  
Vicente Lima Crisóstomo
Keyword(s):  
Corporate Governance ◽  
Good Governance ◽  
Generalized Method Of Moments ◽  
Ownership Concentration ◽  
Minority Shareholders ◽  
Governance Practices ◽  
Corporate Governance Quality ◽  
The Relationship ◽  
Negative Linear Relationship

The relationship between ownership concentration and corporate governance quality is analyzed in Brazil. Models are estimated by the system generalized method of moments (GMM) for a balanced panel of 85 companies in the period 2010-2013. The results indicate that the concentration of ownership has an adverse effect on the quality of corporate governance, as measured by an index based on 28 voluntary good governance practices. The negative linear relationship indicates that large shareholders are unfavorable to adoption of best corporate governance practices. Additionally, the negative quadratic relationship reinforces this result to high levels of concentration highlighting the possibility of expropriation of minority shareholders. Less ownership concentration favors the quality of corporate governance suggesting that the need for coalition to control decreases the power of the main shareholder, possibly helping to alleviate the conflict between controlling and minority shareholders under the principal-principal agency model theoretical framework.

scholarly journals How to evaluate the quality of remuneration policy? Evidence from the Polish banking sector

2020 ◽  
Vol 70 (3) ◽  
pp. 423-447
Author(s):  
Agnieszka Słomka-Gołębiowska ◽  
Piotr Urbanek
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Institutional Perspective ◽  
Top Executives ◽  
Executive Remuneration ◽  
Remuneration Policy ◽  
Governance Practices ◽  
Foreign Corporations ◽  
Public Banks

AbstractIn our paper we use an institutional perspective to define the concept of the quality of remuneration policy. Traditional perspective focuses on pay-per-performance relationship between top executives' remuneration and companies' performance. This study is based on the assumption that the acquisition of normatively defined compensation practices and structures is more important for the successful organization than the practices which enhance efficiency defined on the basis of input (compensation) – output (company's performance) relationship. We examine the relationship between the quality of executive remuneration policy and corporate governance standards in banks with a controlling blockholder. Based on the sample of a hand-collected data on corporate governance characteristics, executive remuneration, and financial results of all public banks in Poland from 2005 to 2015, we find that the effective implementation of sound corporate governance practices should be rooted in the form of obligatory normative acts. Consistent with other studies we find a positive and statistically significant relationship between the corporate governance measures and the quality of remuneration policy. In particular, our study shows the significant role of two institutional factors positively determining the efficiency of incentive contracts: remuneration committees and institutional ownership. We also find that the banks controlled by foreign corporations, especially the US–UK–Ireland financial institutions, have a significantly more effective compensation policy than the banks controlled by domestic investors.

scholarly journals Trade credit and bank credit as alternative governance structures in South Africa: evidence from banking sector development

2017 ◽  
Vol 12 (3) ◽  
pp. 204-214
Author(s):  
Shame Mugova
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Trade Credit ◽  
Good Governance ◽  
Bank Loan ◽  
Governance Structures ◽  
Working Capital ◽  
Banking Sector Development ◽  
Governance Practices ◽  
Capital Financing

Financial sector development is an influential force that outlines the financing and governance of firms in emerging economies. Suppliers and bankers represent alternative governance structures to a firm because of their trade credit and loan requirements, respectively. The continuous monitoring of investment by banks and suppliers impacts on corporate disclosure and practices. The study compares a sample of Johannesburg Stock Exchange (JSE) firms listed on the Socially Responsible Investment (SRI) index which measures corporate governance and those not listed on the index. A Generalized Least Squares (GLS) random effect regression of banking sector development and trade credit of firms listed on the JSE SRI and non-SRI listed firms was done to ascertain whether trade credit gives firms a preferred governance system and structure. The findings affirm that good corporate governance practices improve access to bank loans for working capital financing and good governance practices do not consequently result in more bank loan as a preferred governance structure for working capital financing compared to use of trade credit.

Relationship between Code of Corporate Governance and Corporate Financial Performance (An Empirical Study of Food Companies Listed on KSE)

GIS Business ◽  
2017 ◽  
Vol 12 (4) ◽  
pp. 01-09
Author(s):  
Asma Rafique Chughtai ◽  
Afifa Naseer ◽  
Asma Hassan
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Securities And Exchange Commission ◽  
Executive Directors ◽  
Agency Conflicts ◽  
Cross Sectional ◽  
Return On Equity ◽  
Governance Practices ◽  
Code Of Corporate Governance ◽  
The Impact

The crucial role that implementation of Code of Corporate Governance plays on protecting the rights of minorities, shareholders, local as well as foreign investors cannot be denied. Companies all over the world are required to implement their respective Code of Corporate Governance for avoiding agency conflicts between companies management and stakeholders and for assuring transparency in accountability. This paper aims at exploring the impact of implementation of corporate governance practices (designed by Securities and Exchange Commission of Pakistan) have on the financial position of companies. For explanatory variables of the study, composition of the board as per the Code of Corporate Governance that comprises of presence of independent, executive and non-executive directors has been taken into consideration. Return on equity has been taken as an indicator of firms profitability i.e. the dependent variable. For this study, companies listed on food producing sector of Karachi Stock Exchange have been screened for excogitation of the relationship. It is an empirical research based on nine years data from 2007–2015. Using Hausman Test for selecting the data analysis technique between Fixed or Random, Fixed Cross Sectional Panel Analysis has been used for analysis of the data collected. Findings indicate that presence of independent, executive and non-executive directors as per the code requirements levies a significant impact on the profitability of companies indicated by return on equity. It is, thus concluded that companies should ensure compliance with code of governance practices to reduce not only the agency issues but also to increase their profitability.

DHFL Meltdown: The Corporate Governance Lapses

2021 ◽  
pp. 097282012199882
Author(s):  
Daitri Tiwary ◽  
Arunaditya Sahay
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Housing Finance ◽  
Shadow Banking ◽  
Share Prices ◽  
A Value ◽  
Governance Practices ◽  
The Board Of Directors ◽  
Company Sector ◽  
Financial Company

India’s non-banking financial institutions (NBFIs), broadly constituting the less-regulated shadow banking sector, have been plagued with scams, triggering a domino effect in the Indian money market. Major corporate governance issues were highlighted in NBFIs with the unfurling of the ILF&S fraud; it virtually created a sub-prime crisis. In such a scenario, where the shadow banking sector was subject to change in regulations to ensure vigilance, corporate governance lapses had again led to the meltdown of Kapil Wadhawan led Dewan Housing Finance Limited (DHFL). Registering a net profit growth of 25% in the third quarter of financial year 2017, DHFL was one of India’s leading housing finance companies with a value of whopping ₹1.01 trillion as its asset under management (AUM). The company had nose-dived from its coveted position, suffering a loss of ₹22.23 million for the last quarter of the financial year 2018–2019. The company’s credit ratings of commercial papers and non-convertible debentures were downgraded; non-payment of interests led to enforcement of resolution plan, with the board of directors acceding to nationalized banks. The company’s reputation had crashed with its share prices, amidst allegations of lookout notice issued for its promoters for siphoning funds through shell companies. The case describes the oversights and negligence of DHFL in terms of corporate governance practices in the context of the NBFC (non-banking financial company) sector. The jury is out to evaluate whether Wadhawan had followed the rules of corporate governance in letter and spirit, or the tightening noose of regulations and market sentiments around the ‘shadow banking’ sector of India spelt doom for DHFL.

Sign in / Sign up

Export Citation Format

Share Document