Exploring the role of corporate governance in driving financial performance: An empirical investigation of Nepalese commercial banks

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This study delves into the substantial impact of corporate governance practices on a company’s financial performance, focusing specifically on Nepalese commercial banks in the Kathmandu Valley. With 419 participants from all 27 «A» grade commercial banks, the study concentrates on employees currently working in these banks, particularly top-level staff such as managers, department heads, and officers. The primary objective is to investigate the role of corporate governance in driving financial performance, using Return on Assets (ROA) and Return on Equity (ROE) as financial performance indicators of banks. The study explores various factors influencing corporate governance’s impact, including corporate governance policies, disclosure policies, board size, income diversity, and ethnic diversity. Data collection involves primary data from participants associated with the banks, and the analysis is conducted using the Statistical Package for the Social Sciences (SPSS). Descriptive, correlation, and regression analyses are employed to understand the relationship between corporate governance and financial performance variables. Notably, regular evaluations of the board of directors are found to have a beneficial impact on financial performance. A bank’s transparency in sharing performance information exhibits a stronger positive correlation with ROE (R=0.183) compared to ROA (R=0.060), suggesting that ROE is more sensitive to disparities in information availability. Furthermore, the study identifies a negative impact of board size on financial performance, with low-income diversity positively influencing it and board ethnic diversity exerting a negative and statistically significant influence.

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    • Table 1. Demographic profile of respondents
    • Table 2. Descriptive statistics of corporate governance and financial performance
    • Table 3. Model summary – ROA
    • Table 4. ANOVA
    • Table 5. Coefficients of ROA
    • Table 6. Model summary – ROE
    • Table 7. ANOVA
    • Table 8. Coefficients of ROE
    • Table 9. Model summary (H1)
    • Table 10. ANOVA (H1)
    • Table 11. Coefficients (H1)
    • Table 12. Model summary (H2)
    • Table 13. ANOVA (H2)
    • Table 14. Coefficients (H2)
    • Table 15. Model summary (H3)
    • Table 16. ANOVA (H3)
    • Table 17. Coefficients (H3)
    • Table 18. Model summary (H4)
    • Table 19. ANOVA (H4)
    • Table 20. Coefficients (H4)
    • Table 21. Model summary (H5)
    • Table 22. ANOVA (H5)
    • Table 23. Coefficients (H5)
    • Formal Analysis
      Padam Dongol
    • Funding acquisition
      Padam Dongol
    • Investigation
      Padam Dongol
    • Project administration
      Padam Dongol
    • Software
      Padam Dongol
    • Supervision
      Padam Dongol
    • Writing – original draft
      Padam Dongol
    • Conceptualization
      Sajeeb Kumar Shrestha
    • Data curation
      Sajeeb Kumar Shrestha
    • Methodology
      Sajeeb Kumar Shrestha
    • Resources
      Sajeeb Kumar Shrestha
    • Validation
      Sajeeb Kumar Shrestha
    • Visualization
      Sajeeb Kumar Shrestha
    • Writing – review & editing
      Sajeeb Kumar Shrestha