An empirical analysis of Factors of Mechanism of Corporate Governance and Bank-Specific Factors affecting the performance of selected Indian Banks

An organized Banking sector of any country act as a catalyst for the economic development of the country, Indian Banking sector is the most important component of Indian financial system which work on many dimensions for the economic development of the country including mobilization of savings to the Indian financial system through wide network of Branch Banking that leads to availability of funds to investment purposes and capital formation for the developing country like India, where as the performance of Indian banking sector is not up to the mark from more than five years, so the present study aim is to examined the effect of bank’s specific ratios and selected parameters of corporate governance mechanism on Earning per Share (EPS) of selected eight Indian banks. Earnings per share (EPS) have taken as dependent variables to know financial performance of eight selected Indian Banks. Whereas gross nonperforming assets (GNPA) and Dividend Payout Ratio (DPR) were taken as bank specific independent variables, On the other hand board independency (BIND), Frequency of board meeting (FBM) and capital adequacy ratio (CAR) were considered as parameters of corporate governance. The present research using Panel multiple regression techniques to analyze the factors affecting the earning per share (EPS) during the period 2010 – 2019, On the basis of Hausman test the null hypothesis random effect model is appropriate is rejected due to (p<0.05)and alt hypothesis-fixed effect model was accepted and found appropriate for the model applied for the study. The study revealed the following result¬Board independency (BIND) is positively related with the earning per share but statistically insignificant but frequency of bard meetings (FBM) and dividend payout ratio (DPR) are positively related with the EPS as well as statistically significant, capital adequacy ratio (CAR) and gross non-performing assets (GNPA) are negatively related with EPS but CAR is insignificant and GNPA is statistically significant. © 2020 Elixir All rights reserved. Elixir Fin. Mgmt. 146 (2020) 54766-54770 Finance Management Available online at www.elixirpublishers. com (Elixir International Journal) Mohd Asif Intezar et al. / Elixir Fin. Mgmt. 146 (2020) 54766-54770 54767 relationship between selected variables. Dzingaai et.al (2017) observed weak but positive correlation between independency in board and return on equity. Buallay et.al (2017) revealed the insignificant relationship between board independency and performance of listed companies of Saudi stock exchange. Over the study of 36 scheduled commercial banks during 2001 – 2014 Mariappan and Thyagarajan (2018) revealed positive and significant relationship between board independency and banks performance. Performance of state owned banks had strong effect of numbers of independent directors in board composition in the research of Jayati Sarkar and subrata Sarkar (2018). Frequency of board meeting (FBM) and Bank Performance A large number of researchers argue that frequency of board meeting may or may not influence the performance of banks, anshuman kumar and yatin nihalani (2014) examine the impact of numbers of board meetingsin a year on earning per share (EPS) and the finding concluded that there is no significant relationship between board meetings and EPS. Rekha handa (2014) concluded that there is a negative significant relationship between board meetings and financial f performance of banks Narwal and Jindal (2015) has found no significant relationship between board meetings and profitability of banks with the help of correlation and ols regression model.Over the study of 42 Bahrain banks essa ahmad and allam hamdan (2015) concluded that corporate governance variables doesn’t significant to the performance of banks. Ahmad Al-baidhani (2014) analyzed the impact of board meetings in a year on the performance of banks through return on assets and found positive and significant relationship on ROA. The performance of banks were studies on the basis of ROA, ROE and EPS through the impact of frequency of board meetings and found positive relationship between independent and dependent variables after applying correlation and regression by najeeb haider et.al (2017). Moderate relationship between ROE & ROA and Board Independency & Frequency of Board Meetings was observed through multiple regressions in the study over 275 firms listed in NSE during (2011-15) by Palaniappan G. (2017). Uzma, and Fatima et.al (2018) revealed that there is insignificant statistical relationship between board meetings and return on assets & earning per share. Capital adequacy ratio (CAR) and Bank Performance Rafiqul alam and fahmida (2017) in their study revealed liner relationship exist between car and return on assets and nonlinear relationship between car and return on equity & earnings per share of commercial banks of Bangladesh. Capital adequacy ratio was found insignificant with the performance of listed banks in Indonesian stock exchange during the period (2008-12) in the study of Lukas and Basuki (2015). Multiple regression analysis over 40 banks for the duration 2008-09 to 2011-12 has shown capital adequacy ratio is positively related to the performance of banks through return on assets and return on equity in the study of kanojiaandpriya (2016). Gross non-performing assets (GNPA) and Bank Performance A study over seven public sector banks was done by Chetan Dhude (2017) to know the relationship of Gross nonperforming asset on net profit of banks by applying panel regression and revealed except SBI and PNB banks namely BOI, United Bank of India, BOB, Indian overseas bank and central banks of India had negative correlation between gross non-performing assets and their net profit where as SBI and PNB has shown positive correlation between their GNPA and net profit. Arasu et.al (2019) has found gross non-performing assets negatively significant with ROA while net NPA was positively significant with ROA in their study covering ten public and ten pvt sector banks. Except SBI all five nationalized banks were negatively correlated in their relationship between gross non-performing assets and net profit whereas in sbbi net profit was not at all affected by GNPA in the study of kiran and jones (2016). High correlation was revealed in the research of Jayakkodi et.al (2016) between gross non-performing assets and return on assets of public and private sector banks. Performance of Indian Scheduled commercial banks for ten years from 200708 to 2016-17 and also the impact on non-performing assets on their profitability was analyzed through regression analysis and concluded that there is significant relationship of GNPA with gross advances and ratio of net npa to net advances on the other hand insignificant relationship between gnpa to total assetss and net npa to net advances was found in the research of Nachinruthu and Vein (2019). Dividend Payout Ratio (DPR) Murekefu and Ouma (2012) investigated the relationship between dividend payout ratio and the performance of listed firms in Nairobi securities exchange during the period (20022010) with the help of regression analysis they found strong positive relationship which revealed that’s Dividend policy was relevant. Impact of dividend payout ratio on the financial performance of fifteen banks through return on equity on the Nigerian Stock exchange from 2009-2014 was studied by E.ldewele and A.Murad (2017) which revealed positive significant relationship between dividend payout ratio and financial performance of banks. Dividend payout ratio was found negatively related with the performance of deposit money banks in Nigeria by using correlation analysis and multiple regressions in the analysis of Yusuf BR (2004-13). Shareholder wealth was found negatively significant with the dividnd payout ratio significant of the five industries in India namely automobile, infrastructure&construction, energy, information technology and pharmaceutical in the research of Thirumagal and Vasantha (2018) covering 2001-2015 by using Panel Data Regression. Dividend policy was studied to know the impact of dividend payout ratio on earning per share of Indian automobile companies specifically tata motors and force motors which revealed dividend payout ratio was positively significant with EPS. Nadeem khan and shamim has researched the impact of dividend payout ratio on earning per share of the companies belongs to eight sectors which were listed in Karachi stock exchange during 2009-2013 which resultant EPS had positive impact on all the eight sectors except forestry sector (paper and board) in which there was negative association between dividend payout ratio and earning per share. Return on equity and financial leverage were negatively significant with dividend payout ratio but earning per share was not clearly significant with dividend payout ratio in the research of Do Thi Van Trang (2016). Conceptual Framework Hypothesis 1. Board independency has significant impact on EPS. 2. Capital adequacy ratio has significant impact on EPS. 3. Frequency of Board Meetings has significant impact on EPS. 4. Gross Non-Performing Assets has significant impact on EPS. Mohd Asif Intezar et al. / Elixir Fin. Mgmt. 146 (2020) 54766-54770 54768 5. Dividend payout ratio has significant impact on EPS.