As the calculated f value is 1.376 for ROA and 1.494 for
ROE, both are smaller than the f table value. So we cannot reject the null
hypothesis. That means there is no linear relationship between dependent and
independent variables and the model is insignificant for selected private
commercial banks. So there has no impact of corporate governance on both ROA
and ROE of selected private commercial banks.
doing the analysis, following findings are being identified:
a) There is very insignificant relationship found between
corporate governance practices and selected state owned banks’ financial
performance. Independent variables i.e. Board size, number of board meetings,
CEO’s compensation, number of audit committee meetings are strongly correlated
with ROA and moderately correlated with ROE.
More variation can be explained for ROA than ROE. It has been seen that
individual relationship between independent variables and dependent variable,
all independent variables except number of audit committee meeting frequency
are negatively correlated to both ROA and ROE.
b) Private Banks are also not complying all of the issues of corporate
governance but they maintain some of the important matters of corporate
governance which are important to stay in sound financial position. Same
independent and dependent variables have been taken in this study. Collectively
independent variables are strongly correlated to both the dependent variables.
But variation explained by the model for both cases is over 50 percent.
Adjusted R2 is low in either cases that means the model is fit
enough. But chance to take more relevant independent variables to get more
accurate statistics and continuing the further analysis.
c) This study clearly indicates the NPL (%) for both state
owned commercial banks (SCBs) and private commercial banks (PCBs). Figure-1
shows that NPL (%) is higher for SCBs from year 2011 to 2016 comparing to PCBs.
NPL (%) for SCBs follow upward trend from year 2011 to 2012. After that it
follows downward trend but at a very small in percentage. On the other hand
over the years PCBs follow small NPL (%) comparing with the SCBs’ but alarming
issue is that it follows an upward trend which may again affect the total
banking sector as well as whole economy.
d) There might be other variables that influence the financial performance
of both selected state owned and private commercial banks.
issues of corporate governance are broad and complex but it is very important
for a bank to create and maintain its credibility and acceptability to stakeholders.
This study tries to predict the influence of corporate governance components
i.e. board size, number meetings of board of directors, CEO compensation and
number of audit committee members to key financial performance indicators like
return on asset (ROA) and return on equity (ROE). Due to a limited sampling,
the regression fails to give statistically significant adjusted R2
value for both the investigated private and state owned commercial banks. This
paper also tries to point out some loopholes of state owned and private
commercial banks on the issue of corporate governance. Fact is that this study
deals with only four variables which is very small forgetting the more accurate
results. The more variables are taken the more chance to get perfect results.
So there are other variables internally and externally related that might
affect the state of corporate governance. A further study might be carried out
including other variables in the existing model to predict more accurate result
and better understanding.