Corporate Governance and Profitability: Evidence from Small Finance and Private Banks in India

• Published in: Pacific Business Review International Vol. 16; no. 7
• Main Authors: Sonal Raina Tikku, Singh, Shivoham, Kadyan, Sunil, Bhasin, Narinder Kumar, Sharma, Ashok
• Format: Journal Article
• Language: English
• Published: Udaipur Pacific Academy of Higher Education and Research 01.01.2024
• Subjects: Corporate governance; India
• ISSN: 0974-438X

Corporate Governance (CG) plays an indispensable role in today's financial environment. In developing countries, it acts as perception creator in addition to fuel for attracting investments from across the world. Better CG has an impact on economies of the countries throughout the globe. In the present study, we identify the impact of corporate governance variables on profitability of private and small finance banks in India. We have used panel data of 25 private and small finance banks in India. The data was taken for the period 20162021.The dissection involves 5 CG variables relating to board independence, women directors, board committees, ownership structure and board meetings. 2 control variables namely firm size and firm age. Return on Asset (ROA) was used as an indicator of bank 's profitability. Based on the diagnostics tests, Ordinary Least Square Regression was applied. The results reflects that board independence with p-value of 0.00 has a positive influence on bank's profitability. Also the F Statistics is at 4.585, which is significant and can sufficiently explain the relationship between corporate governance and Return on Asset. The study can help these banks to improve their profitability by having more independent directors on board with varied experience.