The book makes a thorough study of the evolution of corporate governance, with a focus on the commercial banking sector in India. It is updated with recent changes in the Companies Act, 2013 and Amendments to SEBI's Listing Agreement, Clause 49, 2014. It is designed for researchers pursuing doctoral and post-doctoral programs. It will also be of interest to banking professionals and bank regulators.
The book is based on an empirical study that covers a sample of 20 banks, during the five-year period from 2004-2005 to 2008-2009. The sample is selected from all segments of commercial banks operating in India. A balanced panel regression methodology is used to bring into focus the relationship between corporate governance and bank performance. More specifically, the dependent variable: commercial banks' performance is measured with respect to their valuation measured by two market-based measures: Tobin Q proximate, Price to Book Value and one accounting measure, Return on Assets.
The impact on banks' risk / soundness is measured by analysing Gross Non Performing Advances to Total Advances, Capital Risk Asset Ratio and Total Loans to Total Assets. The explanatory variable 'corporate governance' is further specified as to the bank's board size, director busyness / reputation, diligence of independent/non-executive directors and risk management internal control processes. To the best of knowledge, this is the first attempt to study this relationship in the Indian context. The most important contribution of this research is that it empirically recommended in 2010 that independent directors should be allowed a maximum directorships of 6 companies; executive directors must limit their outside directorships to 3; both these findings are validated in the regulatory changes under the Companies Act, 2013 and Amendments to Clause 49, in September, 2014.
1. An Introduction to Corporate Governance and the Scope of this Study
2. Research Methodology
3. Evolution of Corporate Governance in India
4. Corporate Governance of Commercial Banks in India: A Historical Perspective
5. Data Analysis and Interpretation: Discussion and Results
6. Summary and Conclusions