Monitoring Review rosmalina gizi 4
A Study on
Corporate Governance
Practices
Of
Selected Banks in India
4th Monitoring Review
Submitted to
RK University
Presented by:
S.Sandhya
Assistant Professor,
Aurora’s PG College, Hyderabad
Supervised by:
Dr.Neha Parashar
Associate Professor, Xcellon
Business School
January, 2016
Progress Report
Suggestions made in the 3rd Monitoring review:
1. Alterations to Title:
A study on Corporate Governance Practices of Selected Banks in India
2. Improve Objectives:
To study the impact of corporate governance practices on firm profitability
To analyze the impact of corporate governance practices on enterprise value
Compare the Corporate Governance Practices and financial performance of rated
and non-rated banks
Corporate Governance Index (CGI):
CGI can be used to know the extent to which the banks are following the corporate
governance principle. CGI developed especially for Indian banks is being used. The index is
developed by Prof Sumedha Tuteja and Dr C S Nagpal in their research article “Formulation
of Corporate Governance Index for Banks in India” Research Journal of Finance and
Accounting, Vol.4, No.7 (2013).
The basis for preparation of the index is clause 49 of Listing Agreement issued by SEBI. It
covers major factors required to know about the corporate governance of banks namely;
board of directors, various board committees, disclosure levels, remuneration of the top
management, risk management and related party transactions. There are sub-elements under
each category to which scores are assigned. (Annexure I)
Sample Banks:
Purposive sampling is done. Ten banks have been selected. Five rated by ICRA and five nonrated picked from the Bank index of BSE. The list of banks is:
Rated Banks:
1. Andhra Bank
2. Bank of Baroda
3. Bank of India
4. Central Bank
5. Punjab National Bank
Non-rated Banks: (Based on one year gain)
1. Kotak Mahindra Bank
2. HDFC Bank
3. SBI
4. Federal Bank
5. ICICI Bank
Time period of the study:
The study is being done for a period of ten years (2006-2015)
Definition of Variables:
Independent Variables
Corporate Governance ratings
Corporate Governance Index
Dependant Variable
Profitability- two accounting measures are used; Return on Asset (ROA) and Net
Interest Margin (NIM)
ROA= Net profit/ Total assets
NIM= (Interest income- interest expense) / Average Interest earning assets
Firm Value- two market-driven variables will be used namely Tobin’s Q (TQ) and
Price –to-book value(PBV)
TQ= (Market value of equity+ total debt of the bank)/book value of total assets
PBV= Market price of equity/ book value of equity
Statistical tools
CGI is developed to using data handpicked from the annual reports of the banks and
other sources like articles of the banks.
Correlation between the Corporate governance and performance to understand the
interrelation
Causal research design
Scatter diagram and best fit line
Panel regression analysis
Corporate Governance
Practices
Of
Selected Banks in India
4th Monitoring Review
Submitted to
RK University
Presented by:
S.Sandhya
Assistant Professor,
Aurora’s PG College, Hyderabad
Supervised by:
Dr.Neha Parashar
Associate Professor, Xcellon
Business School
January, 2016
Progress Report
Suggestions made in the 3rd Monitoring review:
1. Alterations to Title:
A study on Corporate Governance Practices of Selected Banks in India
2. Improve Objectives:
To study the impact of corporate governance practices on firm profitability
To analyze the impact of corporate governance practices on enterprise value
Compare the Corporate Governance Practices and financial performance of rated
and non-rated banks
Corporate Governance Index (CGI):
CGI can be used to know the extent to which the banks are following the corporate
governance principle. CGI developed especially for Indian banks is being used. The index is
developed by Prof Sumedha Tuteja and Dr C S Nagpal in their research article “Formulation
of Corporate Governance Index for Banks in India” Research Journal of Finance and
Accounting, Vol.4, No.7 (2013).
The basis for preparation of the index is clause 49 of Listing Agreement issued by SEBI. It
covers major factors required to know about the corporate governance of banks namely;
board of directors, various board committees, disclosure levels, remuneration of the top
management, risk management and related party transactions. There are sub-elements under
each category to which scores are assigned. (Annexure I)
Sample Banks:
Purposive sampling is done. Ten banks have been selected. Five rated by ICRA and five nonrated picked from the Bank index of BSE. The list of banks is:
Rated Banks:
1. Andhra Bank
2. Bank of Baroda
3. Bank of India
4. Central Bank
5. Punjab National Bank
Non-rated Banks: (Based on one year gain)
1. Kotak Mahindra Bank
2. HDFC Bank
3. SBI
4. Federal Bank
5. ICICI Bank
Time period of the study:
The study is being done for a period of ten years (2006-2015)
Definition of Variables:
Independent Variables
Corporate Governance ratings
Corporate Governance Index
Dependant Variable
Profitability- two accounting measures are used; Return on Asset (ROA) and Net
Interest Margin (NIM)
ROA= Net profit/ Total assets
NIM= (Interest income- interest expense) / Average Interest earning assets
Firm Value- two market-driven variables will be used namely Tobin’s Q (TQ) and
Price –to-book value(PBV)
TQ= (Market value of equity+ total debt of the bank)/book value of total assets
PBV= Market price of equity/ book value of equity
Statistical tools
CGI is developed to using data handpicked from the annual reports of the banks and
other sources like articles of the banks.
Correlation between the Corporate governance and performance to understand the
interrelation
Causal research design
Scatter diagram and best fit line
Panel regression analysis