A Perception Survey on the State of Corporate Governance Practices in Banks

Since the occurrence of the Great Financial Crisis (GFC) of 2007–2008, a lot has been said about the risk management and corporate governance practices of the banks globally. This paper attempts to investigate the state of corporate governance practices of banks in India. The authors observed that most of the studies carried out on the subject were not performed on the banking industry. Further, such studies merely analysed the extent of disclosure done by the companies in their mandatory disclosure reports for corporate governance. The premise of such studies is usually better disclosure means better governance. The authors, however, believed that a perception of the bank executives would prove to be a real test for judging the quality of corporate governance mechanisms in the banks.

The sample consists of 10 banks –5 from the public sector and 5 from the private sector for the study. The data were collected from 321 bank executives of the sample banks in the National Capital Region (NCR).

The study not only gauges the overall perception of the bank executives but also gives some insights into the difference between the trends across various management levels of executives. The study thoroughly compares the perception between public sector banks and private sector banks on various aspects of corporate governance practices. The study also devises a regression model for the overall perception of the corporate governance on the basis of key management practices of the banks.

This study assumes importance because for the first time, an attempt has been made to gauge the perception of managers and senior bank executives regarding the governance at their employer banks, i.e., at the firm level. Earlier studies have only focused on country-level implications. The surveys in earlier studies also only used secondary data – literature survey or disclosure survey from corporate governance reports.