As the calculated f value is 1. 376 for ROA and 1. 494 forROE, both are smaller than the f table value. So we cannot reject the nullhypothesis. That means there is no linear relationship between dependent andindependent variables and the model is insignificant for selected privatecommercial banks. So there has no impact of corporate governance on both ROAand ROE of selected private commercial banks.
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5. 0 Findingsand Conclusion5. 1 FindingsAfterdoing the analysis, following findings are being identified: a) There is very insignificant relationship found betweencorporate governance practices and selected state owned banks’ financialperformance. Independent variables i. e. Board size, number of board meetings, CEO’s compensation, number of audit committee meetings are strongly correlatedwith ROA and moderately correlated with ROE.
More variation can be explained for ROA than ROE. It has been seen thatindividual relationship between independent variables and dependent variable, all independent variables except number of audit committee meeting frequencyare negatively correlated to both ROA and ROE. b) Private Banks are also not complying all of the issues of corporategovernance but they maintain some of the important matters of corporategovernance which are important to stay in sound financial position. Sameindependent and dependent variables have been taken in this study. Collectivelyindependent variables are strongly correlated to both the dependent variables.
But variation explained by the model for both cases is over 50 percent. Adjusted R2 is low in either cases that means the model is fitenough. But chance to take more relevant independent variables to get moreaccurate statistics and continuing the further analysis. c) This study clearly indicates the NPL (%) for both stateowned commercial banks (SCBs) and private commercial banks (PCBs).
Figure-1shows that NPL (%) is higher for SCBs from year 2011 to 2016 comparing to PCBs. NPL (%) for SCBs follow upward trend from year 2011 to 2012. After that itfollows downward trend but at a very small in percentage. On the other handover the years PCBs follow small NPL (%) comparing with the SCBs’ but alarmingissue is that it follows an upward trend which may again affect the totalbanking sector as well as whole economy. d) There might be other variables that influence the financial performanceof both selected state owned and private commercial banks. 5. 2 ConclusionTheissues of corporate governance are broad and complex but it is very importantfor a bank to create and maintain its credibility and acceptability to stakeholders. This study tries to predict the influence of corporate governance componentsi.
e. board size, number meetings of board of directors, CEO compensation andnumber of audit committee members to key financial performance indicators likereturn on asset (ROA) and return on equity (ROE). Due to a limited sampling, the regression fails to give statistically significant adjusted R2value for both the investigated private and state owned commercial banks. Thispaper also tries to point out some loopholes of state owned and privatecommercial banks on the issue of corporate governance. Fact is that this studydeals with only four variables which is very small forgetting the more accurateresults. The more variables are taken the more chance to get perfect results.
So there are other variables internally and externally related that mightaffect the state of corporate governance. A further study might be carried outincluding other variables in the existing model to predict more accurate resultand better understanding.