Corporate Performance, Board Structure and Its Determinants in the Nepalese Banking Industry

This study examines the relation between board structure and firm performance using a sample of Nepalese banking firms during 2010-2014. To identify the determining factors of corporate performance,return on assets (ROA) and Tobin's Q are taken as dependent variables.The leverage, firm size, non-performing loan, capital adequacy ratio board size, board meeting, number of outside directors, and number of executive committee are taken as independent variables.The data are collected from the Banking and Financial Statistics published by Nepal Rastra Bank, NRB Directives, legal provisions incorporated in Companies Act, 2063 and concerned by-laws regarding corporate governance, the provision of Bank and Financial Institution Act, 2063; supervision report of NRB. In addition to these, different published articles, reports, books and magazines are also analyzed. The information regarding compliance of legal provisions on corporate governance is collected from Regulation and Supervision Department of Nepal Rastra Bank, Company Registrar Office and also from the concerned banks.The regression analysis is used to examine the relationship between board structure and firm performance of Nepalese commercial banks.The empirical result shows that there is negative and significant relationship between board size and bank ROA as well as Tobin's Q in the commercial banks. Likewise the board meeting and number of executive committee have positive and significant relationship with ROA. The leverage has negative and significant relationship with Tobin's Q, however, the firm size, capital adequacy ratio, and number of executive committee have positive and significant relationship with Tobin's Q