Monitoring Review rosmalina gizi 4

(1)

A Study on

Corporate Governance

Practices

Of

Selected Banks in India

4 th

_{Monitoring Review}

Submitted to

RK University

Presented by:

S.Sandhya

Assistant Professor,

Aurora’s PG College, Hyderabad

Supervised by:

Dr.Neha Parashar

(2)

January, 2016

Progress Report

Suggestions made in the 3

rd

_{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 non-rated 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

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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