Effect of corporate governance on financial performance of bank in Nepal

Corporate governance appeared to be the global issue and global trend in most of the commercial industries of public concern than ever before. Corporate governance is about credibility, transparency and accountability. It is also about maintaining an effective disclosure of information that will foster good corporate performance. This study attempts to investigate the relationship between financial performance and corporate governance of commercial banks in Nepal. Specifically, it examines the effects of board size, audit committee, and portion of independent directors on return on equity and nonperforming loan. This study is based on secondary data collected from the annual reports of 13 commercial banks of Nepal. Samples for this study were taken from 65 observations in the review period from 2010 to 2015. The study finds out that the board size negatively impacts the financial performance of commercial banks in Nepal whereas audit committee size and portion of independent directors positively impact the financial performance of commercial banks in Nepal.