Corporate Governance and Efficiency in Nepalese Commercial Banks

Abstract

The 1997-1998 economic crises in the Asian countries highlighted the importance of corporate governance. In developing countries such as Nepal, a good governance of banks is crucial for the survival of its economy. This study investigates the impact of corporate governance on efficiency of Nepalese commercial banks. Corporate governance variables are represented by board size, independence and diligence, Audit Committee size, independence and diligence and ownership structure. The non-performing loan variable is used for bank’s efficiency. The regression analysis is used to examine the relationship between corporate governance and efficiency of bank. The findings show that bigger board and audit committee size and lower frequency of board meeting and lower proportion of institutional ownership lead to better efficiency in the commercial banks.

Keywords: corporate governance, commercial bank, board, audit committee, ownership structure, efficiency, Nepal.

JEL Classification: G20, G21, G30, G32