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Effect of bank-specific and governance-specific variables on the productivity and profitability of banks

Author

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  • Karam Pal Narwal
  • Shweta Pathneja

Abstract

Purpose - The purpose of this paper is to analyze the effect of bank-related variables and corporate governance-related variables on the productivity and profitability of public and private sector banks in India. Design/methodology/approach - The Malmquist productivity index is applied to determine the productivity of different banks. Further, return on average assets is used as profitability of banks. The regression analysis is further used to assess the effect of different bank-related and governance-related variables on performance of banks. Findings - Nearly all the bank-specific variables explain the productivity and profitability of banks but a weak relationship is observed between individual governance variables and performance variables. Two governance variables, i.e. board meetings and remuneration explicate the profitability of the public sector banks and only duality explains the profitability of the private sector banks. No significance is found between productivity and governance variables. Originality/value - The study addresses the embryonic issue of corporate governance in the banking sector. The uniqueness of the paper lies in that no study has evaluated the effect of these variables on productivity and profitability of banks simultaneously.

Suggested Citation

  • Karam Pal Narwal & Shweta Pathneja, 2016. "Effect of bank-specific and governance-specific variables on the productivity and profitability of banks," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 65(8), pages 1057-1074, November.
    • Handle: RePEc:eme:ijppmp:ijppm-09-2015-0130
    DOI: 10.1108/IJPPM-09-2015-0130
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    Citations

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    Cited by:

    1. Vera Mirovic & Branimir Kalas & Ines Djokic & Nikola Milicevic & Nenad Djokic & Milos Djakovic, 2023. "Green Loans in Bank Portfolio: Financial and Marketing Implications," Sustainability, MDPI, vol. 15(7), pages 1-14, March.
    2. Eissa A. Al-Homaidi & Mosab I. Tabash & Najib H. S. Farhan & Faozi A. Almaqtari, 2018. "Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1548072-154, January.
    3. Pant, Abhay & Nidugala, Ganesh Kumar, 2022. "Board characteristics and efficiency of value added by banks: Evidence from an emerging economy," Journal of Asian Economics, Elsevier, vol. 79(C).
    4. Faozi A. Almaqtari & Hamood Mohd. Al-Hattami & Khalid M. E. Al-Nuzaili & Mohammed A. Al-Bukhrani, 2020. "Corporate governance in India: A systematic review and synthesis for future research," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1803579-180, January.
    5. Riyanka Baral & Debasis Patnaik, 2023. "Bank efficiency and governance: Evidence from Indian banking," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(3), pages 957-985, September.
    6. Maria Elisabete Neves & Catarina Proença & António Dias, 2020. "Bank Profitability and Efficiency in Portugal and Spain: A Non-Linearity Approach," JRFM, MDPI, vol. 13(11), pages 1-19, November.

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