Exploring the Impact of Corporate Governance on Financial Performance: Evidence from Fourth-generation Private Banks of Bangladesh

Abstract

This study intends to explore the impact of corporate governance on financial performance of fourth generation private banks of Bangladesh for the period from 2014 to 2023. Board Size, Board Gender Diversity, Board Independence, Audit Committee Size, Board Meeting and Risk Management Committee are used as corporate governance attributes while Return on Asset (ROA) and Return On Equity (ROE) are used as proxy of measuring financial performance of banks. This study relies on secondary data. Necessary data have been obtained from the annual reports of respective fourth generation banks. Panel data regression analysis techniques have been conducted to scrutinize the impact of corporate governance on financial performance of banks. The results reveal that Board Size, Board Independence, Audit Committee Size and Board Meeting have a statistically significant impact on financial performance of banks while Board Gender Diversity and Risk Management Committee size do not have any association with the bank performance. These findings highlight that Board Size and Board Independence increase ROA by 3.78% and 3.33% respectivly while Board Size and Board independence increase ROE by 3.29% and 4.19% respectivly. And also Audit Committee Size decreases ROA by 4.03% and ROE by 4.34%. Furthermore, Board Meeting decreases ROE by 1.24%. These findings implies the significance of corporate governance mechansim to boost the performance. Thus, the information derived from this study can be effective and helpful to enhance the understanding of the governing bodies of banks for accelerating banking performance.