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Corporate governance index and firm performance: empirical evidence from Indian banking

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  • Manmeet Kaur
  • Madhu Vij

Abstract

Owing to globalisation the quality of corporate governance (CG) system has become an important factor for a firm's survival. The problem is more critical when banks are taken into consideration because of their important role in the economy. In this study the corporate governance index (CGI) has been constructed to measure the level of implementation of good governance practices and to verify whether the banks performed better with regard to that. The scores of overall CG indices and sub index are analysed using non-parametric Mann-Whitney U test and OLS regression method. The level of compliance is analysed among public and private listed banks in India. The results show that CGI is significantly and positively associated with financial performance of banks measured by return on assets, Tobin's Q and economic value added. Moreover, banks indeed would have a good incentive to voluntarily improve their governance standards as it benefits them in terms of performance.

Suggested Citation

  • Manmeet Kaur & Madhu Vij, 2018. "Corporate governance index and firm performance: empirical evidence from Indian banking," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 8(2), pages 190-207.
    • Handle: RePEc:ids:afasfa:v:8:y:2018:i:2:p:190-207
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    Cited by:

    1. Burak Pirgaip & Mehmet Berktay Akyüz, 2020. "To Be Rated or To Be Indexed: Corporate Governance Rating Experience in Borsa Istanbul," Istanbul Business Research, Istanbul University Business School, vol. 49(2), pages 271-300, November.

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