Do Indian banks perform better in corporate governance than other SAARC nations? An empirical analysis
ISSN: 1472-0701
Article publication date: 8 November 2023
Issue publication date: 30 April 2024
Abstract
Purpose
This paper aims to investigate the role of corporate governance on the bank profitability of Indian banks vis-à-vis South Asian Association for Regional Cooperation (SAARC) nations.
Design/methodology/approach
For the Corporate Governance Index, the authors examined board accountability, transparency and disclosure and audit committee, while Tobin’s Q, return on equity and return on assets are used to measure the bank’s profitability. The study used a two-stage analysis based on balanced panel data for robust findings. Sample of this study consists of 60 commercial banks from India and 60 banks from SAARC nations for the period of 2009–2021. This study used panel regression and a generalized method of moment approach using the CAMELS framework on banking industry-specific variables to determine their respective impacts.
Findings
The findings of this study suggest that board accountability is positive and significantly affects the profitability of banks as indicated by return on assets, return on equity and Tobin’s Q. In contrast, the audit committee has a positive and insignificant impact on return on assets, return on equity and Tobin’s Q, while transparency and disclosure have a negative and significant impact on these metrics. Furthermore, the country dummy result shows a significant positive impact on all the bank performance parameters, implying that Indian banks have the highest degree of convergence with corporate governance as compared to other SAARC nations.
Research limitations/implications
This study provides insight to the regulators, policymakers and financial institutions to evaluate the role of corporate governance in emerging economies. However, the findings of the study should be interpreted with caution, as the results are sensitive to the disparity between India and other SAARC nations' government policies, climatic circumstances and cultural or religious traditions.
Originality/value
To the best of the authors’ knowledge, this is the first attempt to gauge the performance of Indian banks vis-à-vis SAARC nations using the CAMELS framework approach. Further, findings of this study suggest some novel evidence tying corporate governance quality with the profitability of banks among SAARC nations.
Keywords
Acknowledgements
Availability of data and material: The data sets used and/or analysed during the current study are available from the corresponding author upon reasonable request.
Competing interest: The authors declare that they have no competing interests.
Funding: Not Applicable.
Author’s contribution: We ensure that all listed authors have approved the manuscript before submission, including their title and designation, and that all authors receive the submission and all substantive correspondence with editors, as well as the full reviews, verifying that all data, figures and materials comply with the transparency and reproducibility standards of both the field and journal.
Citation
Alam, M., Akhtar, S. and Al-Faryan, M.A.S. (2024), "Do Indian banks perform better in corporate governance than other SAARC nations? An empirical analysis", Corporate Governance, Vol. 24 No. 4, pp. 799-830. https://doi.org/10.1108/CG-02-2023-0059
Publisher
:Emerald Publishing Limited
Copyright © 2023, Emerald Publishing Limited