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Do Indian banks perform better in corporate governance than other SAARC nations? An empirical analysis

Mahfooz Alam (Department of Business Administration, University of the People, Pasadena, California, USA)
Shakeb Akhtar (School of Business, Woxsen University, Hyderabad, India)
Mamdouh Abdulaziz Saleh Al-Faryan (School of Accounting, Economics and Finance, Faculty of Business and Law, University of Portsmouth, Portsmouth, UK and Consultant in Economics and Finance, Riyadh, Saudi Arabia)

Corporate Governance

ISSN: 1472-0701

Article publication date: 8 November 2023

Issue publication date: 30 April 2024

246

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

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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