79
DATA ANALYSIS AND INTERPRETATION
“Maintaining governance standards requires accountability at all levels of management.
Hence corporate conduct and culture, based on attributes of self regulation and openness
contribute to the essence of corporate governance”
Naresh Chandra
4.1 INTRODUCTION:
Banks are critical component of the economy. Nationalised banks are owned by the
government and thus the issue of corporate governance in Indian banks is complicated due to
the political intervention in their operation. Corporate governance in banks ensures
transparency and prevents scandals. With high level of transparency and disclosures banks
can not only achieve efficiency but also helps in better performance. The disclosure of
information helps banks improve performance and increase shareholder‟s wealth. The
Sanskrit Subhashita “Satyam bruiyat, priyam bruiyat, na bruiyat satyam apriyam “which
means Speak truth that is palatable, do not speak truth that is unpalatable. It is necessary that
proper disclosures are made by each bank for better governance. In the present chapter the
data collected is analyzed and interpreted.
The chapter has the framework where initially the corporate governance index is prepared
using sixty five variables. The presence of the variable is marked as 1 and the absence and
not properly disclosed is marked as 0. The corporate governance disclosure of five banks for
seven years is determined.
The corporate governance disclosure level is divided into three main dimensions that are
mandatory, non mandatory and other corporate governance disclosures. Disclosure with
respect to three major dimensions is determined and later the overall corporate governance
disclosure level is calculated.
To evaluate the corporate governance relation with that of bank performance initially the
banking performance is analyzed using the three triggers ROA, CAR, NPA. Using the
bivariate correlation the corporate governance disclosure level is correlated with the bank
performance.
The evaluation of corporate governance in banks is also made taking into consideration the
proportion of the non executive director, board committees and the board meeting. The
80
proportion of non executive director relation with that of bank performance is analyzed. The
relation between the board committees and the number of board meeting with the disclosure
level is also evaluated.
Lastly, the corporate governance is evaluated from the shareholders perspective to evaluate
the opinion on the disclosure and whether the corporate governance has the effect on their
investment decision.
4.2 CORPORATE GOVERNANCE DISCLOSURE LEVEL:
The first step in determining the corporate governance disclosure level is to construct the
corporate governance disclosure index. Corporate governance disclosure index is constructed
using sixty five independent variables. The relation between corporate governance and bank
performance is analyzed based on 65 variables through checklist method
The important dimensions of the research analysis are
1. Bank's philosophy on code of governance
2. Board of Directors
3. Audit committee
4. Remuneration Committee
5. Shareholders Committee
6. General Body meetings
7. Disclosures
8. Means of Communication
9. General Shareholder information
10. Non-Mandatory Requirements
11. Other Corporate Governance Requirements
The eleven dimensions are further divided into sixty variables which are the base of the entire
study. Bank‟s philosophy on code of governance, Board of Directors, Audit committee,
Remuneration Committee, shareholders committee, general body meetings, disclosures,
means of communication, general shareholder information are the mandatory disclosure
requirements.
Non mandatory disclosure requirements include:
The Board which specifies the disclosures regarding non-executive Chairman who may be
entitled to maintain a Chairman's office at the bank's expense and also allowed
81
reimbursement of expenses incurred in performance of his duties. It needs to specify that
Independent Directors may have a tenure not exceeding aggregate period of nine years, on
the Board of a company. The listed bank may ensure that the person who is being appointed
as an independent director has the requisite qualifications and experience which would be of
use to the company and in the opinion of the company, would enable him to contribute
effectively to the bank in his capacity as an independent director.
Disclosure of Remuneration Committee –
i. The board may set up a remuneration committee to determine on their behalf and on
behalf of the shareholders with agreed terms of reference, the company‟s policy on
specific remuneration packages for executive directors including pension rights and
any compensation payment.
ii. To avoid conflicts of interest, the remuneration committee which would determine
the remuneration packages of the executive directors may comprise of at least three
directors, all of whom should be non-executive directors, the Chairman of
committee being an independent director.
iii. All the members of the remuneration committee could be present at the meeting.
iv. The Chairman of the remuneration committee could be present at the Annual
General Meeting, to answer the shareholder queries. However, it would be up to the
Chairman to decide who should answer the queries.
Disclosure of Shareholder Rights where a half-yearly declaration of financial performance
including summary of the significant events in last six-months, may be sent to each
household of shareholders.
Apart from above disclosures the disclosure in relation to the training of Board Members,
Audit qualifications where Bank may move towards a regime of unqualified financial
statements and whistle blower policy is part of the non mandatory requirements.
Other corporate governance requirements includes Profile of directors appointed during the
year mentioned by the bank, Code of conduct of banks, CSR ie., corporate social
responsibility taken up by the bank mentioned, disclosure about risk management, segment
wise or product wise performance part of Management Discussion & Analysis, nomination
committee, Auditor‟s certificate provided by the Bank, CEO or CFO certificate provided by
the Bank, Chairman of the Board Executive or Non Executive mentioned and information
related to Independent directors need to be well defined.
82
Table 4.1
Construction of Corporate Governance Disclosure Index
Sl.
No. Questions:
1 Does the bank have brief statement on its philosophy on the code of governance?
2
Board of Directors:
Whether the bank have mentioned Composition and category of directors, for
example, promoter, executive, non-executive, independent non-executive,
nominee director, which institution represented as lender or as equity investor?
3 Does the Bank have attendance of each director at the Board meetings and the last
AGM mentioned in the report?
4 Whether the Bank has mentioned the number of other Boards or Board
Committees in which he/she is a member or a Chairperson?
5 Whether the Bank has mentioned the number of Board meetings held and the date
on which those meetings were held?
6 Audit Committee:
Does the Bank have brief description of terms of reference of Audit committee?
7 Whether the Bank has mentioned the Composition, name of members and
Chairperson of the Audit committee?
8 Have the Meetings and attendance during the year been recorded by the Bank?
9
Remuneration Committee:
Does the Bank give brief description of terms of reference of Remuneration
Committee?
10 Whether the Composition, name of members and Chairperson of Remuneration
Committee mentioned?
11 Whether the Bank has mentioned the attendance during the year?
12 Is the Remuneration policy of Bank mentioned in the report?
13 Whether the Bank has mentioned details of remuneration to all the directors, as
per format in main report?
83
14
Shareholders Committee:
Whether the name of non-executive director heading the committee mentioned in
the report?
15 Does the Bank mention the name and designation of compliance officer of
Shareholder Committee?
16 Whether the number of shareholders‟ complaints received so far mentioned by the
Bank?
17 If the number of complaints not solved to the satisfaction of shareholders
mentioned?
18 If the Number of pending complaints mentioned by the Bank?
19 General Body meetings:
Does the Bank mention the location and time, where last three AGMs were held?
20 Whether any special resolutions passed in the previous 3 AGMs been recorded?
21 Whether any special resolution passed last year through postal ballot and details
of voting pattern mentioned?
22 Does the Bank mention the person who conducted the postal ballot exercise?
23 Whether any special resolution is proposed to be conducted through postal ballot
mentioned by the Bank?
24 Does the bank mention the procedure for postal ballot?
25
Disclosures:
Whether disclosures on materially significant related party transactions that may
have potential conflict with the interests of bank at large made?
26
Whether following is included in the disclosure: Details of non-compliance by the
company, penalties, and strictures imposed on the company by Stock Exchange or
SEBI or any other statutory authority, on any matter related to capital markets,
during the last three years?
27 Whether the Bank has the Whistle Blower policy and affirmation that no
personnel have been denied access to the audit committee?
84
28 Whether the Details of compliance with mandatory requirements and adoption of
the non-mandatory requirements of this clause given?
29 Means of communication
Whether the Quarterly results disclosed?
30 Does the bank display Newspapers wherein results normally published?
31 Does the bank disclose name of the website, where displayed?
32 Whether the official news releases has been disclosed?
33 Whether the presentations made to institutional investors or to the analysts are
made known?
34 Whether management discussion and analysis is a part of annual report or not?
35 Whether the Bank has updated General Shareholder information related to:
AGM: Date, time and venue?
36 Financial year
37 Date of Book closure
38 Dividend Payment Date
39 Listing on Stock Exchanges Stock Code
40 Market Price Data : High, Low during each month in last financial year
41 Performance in comparison to broad-based indices such as BSE Sensex, CRISIL
index etc.
42 Registrar and Transfer Agents Share Transfer System
43 Distribution of shareholding Dematerialization of shares and liquidity
44 Outstanding GDRs/ADRs/Warrants or any Convertible instruments, conversion
date and likely impact on equity
45 Branch locations and address of correspondence
46
Non-Mandatory Requirements:
The Board
Whether A non-executive Chairman may be entitled to maintain a Chairman‟s
office at the company‟s expense?
85
47 Whether they are allowed reimbursement of expenses incurred in performance of
his duties?
48 Whether there are any Independent Directors who may have a tenure not
exceeding, in the aggregate, a period of nine years, on the Board of a company?
49
Remuneration Committee
Whether the board has set up a remuneration committee to determine on their
behalf and on behalf of the shareholders with agreed terms of reference, the
company‟s policy on specific remuneration packages for executive directors
including pension rights and any compensation payment?
50
To avoid conflicts of interest, the remuneration committee, which would
determine the remuneration packages of the executive directors may comprise of
at least three directors, all of whom should be non-executive directors, the
Chairman of committee being an independent director, Does the Bank have it?
51 Do all the members of the remuneration committee be present at the meeting?
52
Shareholder Rights
Whether half-yearly declaration of financial performance including summary of
the significant events in last six-months has been sent to each individual
shareholders?
53
Audit qualifications
Whether the Bank may move towards a regime of unqualified financial
statements stated?
54 Does the Bank conduct training for its Board members?
55 Whether the Bank has Pear Group of BOD to evaluate the performance of non-
executive directors?
56 Other Corporate Governance Requirements
If the Profile of directors appointed during the year mentioned?
57 Whether the Bank has mentioned Code of conduct?
58 Whether the CSR initiatives taken up by the Bank mentioned?
86
59 Whether there is disclosure about risk management?
60 Whether segment wise or product wise performance part of Management
Discussion &Analysis?
61 Does the Bank have nomination committee?
62 Whether Auditor‟s certificate provided by the Bank?
63 Whether CEO or CFO certificate provided by the Bank?
64 Is the Chairman of the Board Executive or Non Executive mentioned?
65 Are the Independent directors well defined?
Corporate governance disclosure index is constructed based on sixty five variables. 1 to 45
are mandatory disclosure requirement related questions. 46 to 55 are non mandatory
disclosure requirements related question and 56 to 65 are other corporate governance
disclosure requirements related questions.
4.2.1 CORPORATE GOVERNANCE DISCLOSURE LEVEL OF BANKS
The analysis of the all the five banks for the seven years is made using the corporate
governance disclosure index. The presence or absence of mandatory, non mandatory and
other corporate governance is measured with the constructed index. 65 variables were
analyzed for 5 banks (65*5=) 325 variables for seven years from 2005 to 2012 (325*7=2275)
which becomes 2275 variables. The corporate governance disclosure index using
dichotomous question about presence and absence of the parameter is used to determine the
corporate governance disclosure level of each bank for seven years that is 2005-2012. The
presence of the variable is marked 1 and the absence is marked as 0. Disclosure variable
which are not properly reported in the bank‟s corporate governance report is also marked 0
since they are also considered as absence of the parameter.
In order to calculate the overall corporate governance disclosure level and its percentage the
below formula is applied.
87
Overall CGDL= Sum of total disclosures made by the bank.
Percentage of overall CGDL =
Once the corporate governance disclosure index is constructed, MS Excel work sheet which
includes the corporate governance disclosure index for seven years is prepared for the all the
five banks. The presence and the absence of the variable is marked in the constructed index
for respective banks for all the seven years that is 2005 to 2012.
Variables present in the corporate governance report and the annual report of the bank is
entered in the work sheet for the given period for all the five banks. Once the sixty five
variables are entered then the total of the variable is taken into consideration. The total score
of individual banks are calculated. Later to get the percentage of overall corporate
governance disclosure level the total score of each bank is divided by the maximum possible
score that is 65 and multiplied with 100 to get the disclosure percentage. The overall
corporate governance disclosure requirement is the sum of the mandatory, non mandatory
and other corporate governance requirement variables. The results of all the three dimensions
are analysed later the overall corporate governance disclosure level is used to correlate with
the bank performance.
88
Table: 4.2
Mandatory Corporate Governance Disclosure Level
SL.
NO. BANK
2005-
06
2006-
07 2007-08
2008-
09
2009-
10
2010-
11
2011-
12 Average %
1 Corporation
Bank 37 39 40 40 40 40 40 39.43 87.62
2 Canara
Bank 41 41 41 41 41 41 41 41.00 91.11
3 PNB 38 41 42 42 42 42 43 41.43 91.11
4 Vijaya
Bank 38 39 38 38 38 38 38 38.14 84.76
5 Syndicate
Bank 37 37 37 37 36 38 39 37.29 82.86
Average 38.2 39.4 39.6 39.6 39.4 39.8 40.2 39.46
Mandatory disclosure is an important corporate governance disclosure variable. It is
independent in nature. There are forty five mandatory requirements which are used to
construct the corporate governance disclosure index.
The above table highlights the mandatory disclosure of five banks for seven years. Canara
Bank and PNB shows the highest disclosure level with 91.11 percent, followed by
Corporation Bank with 87.62%, Vijaya Bank with 84.76% and the least disclosure is by
Syndicate Bank with 82.86%.
In the year 2005-06 the average disclosure of five banks were 38.2 which has gradually
increased year after year where in 2011-12 it is 40.2.
After 2006 where SEBI made the compulsion for disclosures there is an increase in the
disclosure level of the banks.
There is gradual increase in the mandatory disclosure level but in the year 2011-12 it is
showing declining trend which needs to be considered.
89
Table: 4.3
Non Mandatory Corporate Governance Disclosure Level
SL.
NO. BANK
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12 Average %
1 Corporation
Bank 7 8 9 9 9 9 9 8.57 85.71
2 Canara Bank 8 8 8 9 9 9 9 8.57 85.71
3 PNB 4 4 4 4 4 9 9 5.43 54.29
4 Vijaya Bank 3 3 3 3 3 3 3 3.00 30
5 Syndicate
Bank 0 9 9 9 9 9 9 7.71 77.14
Average 4.4 6.4 6.6 6.8 6.8 7.8 7.8 6.66
( Source: Banks Annual Report)
Non mandatory requirements are desirable for effective governance. There are ten non
mandatory requirements which are subdivided under different heads. The above table
highlights the Non mandatory disclosures of five banks for seven years.
Corporation bank and Canara Bank displays highest disclosure level with 85.71% followed
by Syndicate bank with 77.14%, PNB with 54.29% and the least disclosure is by Vijaya Bank
with 30%.
The above table shows the yearly average of the disclosure level of five banks too. It was 4.4
in the year 2005-06, in the year 2006-07 it increased to 6.4, in the year 2007-08 it increased
to 6.6 later to 6.8 in the year 2008-09 and 2009-10. In the year 2010-11 banks showed the
disclosure level of 7.8 which has remained same in the year 2011-12. There is increase in the
non mandatory disclosure level of banks.
90
Table 4.4
Other Corporate Governance Disclosure Level
SL.
NO. BANK
2005-
06
2006-
07
2007-
03
2008-
09
2009-
10
2010-
11
2011-
12 Average %
1 Corporation
Bank 8 9 10 10 10 10 10 9.57 95.71
2 Canara Bank 6 6 6 6 6 6 6 6.00 60
3 PNB 7 8 9 9 9 9 9 8.57 85.71
4 Vijaya Bank 7 8 9 9 9 9 9 8.57 85.71
5 Syndicate
Bank 5 6 6 7 8 8 8 6.86 68.57
Average 6.6 7.4 8 8.2 8.4 8.4 8.4
(Source: Banks Annual Report)
Table 4.4 highlights the Other corporate governance disclosure requirements which are
desirable for effective governance in the bank.
Corporation Bank displays a highest disclosure with bank average of 9.57 that is 95.7%
followed by PNB, Vijaya Bank with 85.71% , Syndicate bank with 68.57% and the least
disclosure is made by Canara bank with 60.00%.
From 2005-12 Corporation bank has made highest disclosure, followed by PNB, Vijaya Bank
with 8.57 as the mean value. In the year 2005-06 Syndicate bank has the least disclosure.
However Canara Bank has the least disclosure for the six years.
The yearly average of five banks for seven years is highlighted in the table. In the year 2005-
06 bank average is 6.6 which has increased to 7.4 in the year 2006-07, 8 in the year 2007-08
and from 2008-09 onwards the average disclosure level is 8.4 till 2011-12.
There is an increasing trend in other corporate governance disclosure level of banks which is
good for better performance of banks.
91
Table 4.5
Overall Corporate Governance Disclosure Level
SL
NO BANKS
2005-
06
2006-
07
2007-
08 2008-09
2009-
10
2010-
11
2011-
12 Average % Rank
1 Corporation
Bank 52 56 59 59 59 59 59 57.57 88.57 1
2 Canara
Bank 55 55 55 56 56 56 56 55.57 85.49 2
3 PNB 49 53 55 55 55 60 61 55.43 85.27 3
4 Vijaya
Bank 48 50 50 50 50 50 50 49.71 76.48 5
5 Syndicate 42 52 52 53 53 55 56 51.86 79.78 4
Average 49.2 53.2 54.2 54.6 54.6 56 56.4
(Source: Banks Annual Report)
Table 4.5 highlights the overall corporate governance disclosure index of five banks. The
Bank average and the yearly average is calculated using the mean value. On the basis of the
yearly average we can infer that every year corporate governance disclosure is showing
increasing trend.
Post 2005-06 periods where the corporate governance report was made compulsory
for all the listed banks the disclosure level has increased. In case of the Corporation
bank there is increase in the disclosure in the year 2006-07 and 2007-08 and has
remained constant till 2011-2012.
In case of the Canara bank the disclosure has increased in 2008-09 and has remained
constant thereafter. Vijaya Bank has displayed increase after 2006-07 and is same
over the period. PNB has shown varied increase in the disclosure level from 2006
onwards. Syndicate Bank has also shown varied increase in the level of disclosure.
Corporation bank has recorded the highest disclosure for seven years with 88.57%
followed by Canara Bank with 85.49%, PNB with 85.27% and Syndicate Bank with
79.78% and Vijaya Bank have recorded the least disclosure with 76.48%.
In the year 2005-06 Canara Bank depicts the highest disclosure and the Syndicate
bank with the lowest disclosure level. In the year 2006-2010 Corporation bank
discloses highest disclosure and Vijaya Bank has least disclosure. From 2010-12
Punjab National bank has got highest disclosure and the Vijaya Bank has got least
disclosure.
92
Based on the average disclosure for the period of 2005-2012 Corporation Bank has got
highest rank followed by Canara Bank, PNB, Syndicate Bank and the Vijaya Bank has got
lowest rank. It is inferred that there is no uniformity in the disclosure level of banks.
Table: 4.6
Mandatory Requirements:
Code of governance and Board of Directors
Sl.
No. CG variable
Corporation
Bank
Canara
bank PNB
Vijaya
Bank
Syndicate
bank
1. Does the bank have brief
statement on its philosophy
on the code of governance? 100.00 100.00 100.00 100.00 100.00
2. Board of Directors:
Whether the bank have
mentioned Composition and
category of directors, for
example, promoter,
executive, non-executive,
independent non-executive,
nominee director, which
institution represented as
lender or as equity investor? 100.00 100.00 100.00 100.00 100.00
3. Does the Bank have
attendance of each director at
the Board meetings and the
last AGM mentioned in the
report? 100.00 100.00 100.00 100.00 100.00
4. Whether the Bank has
mentioned the number of
other Boards or Board
Committees in which he/she
is a member or a
Chairperson? 100.00 100.00 100.00 0.00 100.00
5. Whether the Bank has
mentioned the number of
Board meetings held and the
date on which those meetings
were held? 100.00 100.00 100.00 100.00 100.00
6. Audit Committee:
Does the Bank have brief
description of terms of 100.00 100.00 100.00 100.00 100.00
93
reference of Audit
committee?
7. Whether the Bank has
mentioned the Composition,
name of members and
Chairperson of the Audit
committee? 100.00 100.00 100.00 100.00 100.00
8. Have the Meetings and
attendance during the year
been recorded by the Bank? 100.00 100.00 100.00 100.00 100.00
The above table displays the mandatory disclosure level of each bank for seven years. It can
be observed that all the banks have disclosed the code of conduct, board of directors.
Regarding the information related to board of directors and other variables all the banks has
given good disclosures.
The information regarding whether bank has mentioned the number of other Boards or Board
Committees in which he/she is a member or a Chairperson is done by Vijaya Bank has made
least disclosure.
94
Table: 4.7
Mandatory Requirements: Remuneration Committee
Sl.
No. CG variable
Corporation
Bank
Canara
bank PNB
Vijaya
Bank
Syndicate
bank
1
Remuneration
Committee:
Does the Bank give
brief description of
terms of reference of
Remuneration
Committee? 100.00 100.00 100.00 100.00 100.00
2
Whether the
Composition, name
of members and
Chairperson of
Remuneration
Committee
mentioned? 85.71 100.00 85.71 100.00 85.71
3
Whether the Bank
has mentioned the
attendance during the
year? 85.71 100.00 85.71 100.00 100.00
4
Is the Remuneration
policy of Bank
mentioned in the
report? 100.00 100.00 85.71 100.00 100.00
5
Whether the Bank
has mentioned details
of remuneration to all
the directors, as per
format in main
report? 100.00 100.00 100.00 100.00 14.29
From the above table we can infer that Canara bank is displaying good disclosure in terms of
remuneration committee. Syndicate Bank has the least disclosure about details of
remuneration to all the directors, as per format in main report.
95
Table: 4.8
Mandatory Requirements: Shareholders Committee
Sl.
No. CG variable
Corporation
Bank
Canara
bank PNB
Vijaya
Bank
Syndicate
bank
1
Shareholders
Committee:
Whether the name of
non-executive director
heading the committee
mentioned in the
report? 100.00 100.00 100.00 100.00 100.00
2
Does the Bank
mention the name and
designation of
compliance officer of
Shareholder
Committee? 100.00 100.00 100.00 100.00 100.00
3
Whether the number
of shareholders‟
complaints received so
far mentioned by the
Bank 100.00 100.00 100.00 100.00 100.00
4
If the number of
complaints not solved
to the satisfaction of
shareholders
mentioned? 100.00 100.00 100.00 100.00 100.00
5
If the Number of
pending complaints
mentioned by the
Bank? 100.00 100.00 100.00 100.00 100.00
All the five banks are displaying good disclosure in terms of information related to
shareholder committee.
96
Table: 4.9
Mandatory Requirements: General Body meetings
Sl.
No. CG variable
Corporation
Bank
Canara
bank PNB
Vijaya
Bank
Syndicate
bank
1
Does the Bank mention
the location and time,
where last three AGMs
were held? 100.00 100.00 100.00 100.00 100.00
2
Whether any special
resolutions passed in the
previous 3 AGMs been
recorded? 100.00 100.00 100.00 28.57 100.00
3
Does the bank display
Newspapers wherein
results normally
published? 100.00 100.00 100.00 100.00 100.00
4
Whether any special
resolution passed last
year through postal
ballot and details of
voting pattern
mentioned? 0.00 0.00 71.43 100.00 0.00
5
Does the Bank mention
the person who
conducted the postal
ballot exercise? 0.00 0.00 0.00 0.00 0.00
6
Whether any special
resolution is proposed to
be conducted through
postal ballot mentioned
by the Bank? 0.00 0.00 100.00 0.00 0.00
7
Does the bank mention
the procedure for postal
ballot? 0.00 0.00 0.00 0.00 0.00
8
Disclosures:
Whether disclosures on
materially significant
related party
transactions that may
have potential conflict
with the interests of
bank at large made? 100.00 100.00 100.00 100.00 100.00
97
9
Whether following is
included in the
disclosure: Details of
non-compliance by the
company, penalties,
strictures imposed on
the company by Stock
Exchange or SEBI or
any other statutory
authority, on any matter
related to capital
markets, during the last
three years? 100.00 100.00 100.00 100.00 100.00
10
Whether the Bank have
the Whistle Blower
policy and affirmation
that no personnel have
been denied access to
the audit committee? 71.43 100.00 14.29 85.71 28.57
11
Whether the Details of
compliance with
mandatory requirements
and adoption of the non-
mandatory requirements
of this clause given? 100.00 100.00 100.00 100.00 100.00
Vijaya Bank is displaying least disclosure for special resolutions passed in the previous
3AGMs been recorded. All the banks are displaying least disclosure for the postal ballot
related information. Canara bank is showing good disclosure for the information related to
whistle Blower policy and affirmation that no personnel have been denied access to the audit
committee.
98
Table: 4.10
Mandatory Requirements: Means of communication
Sl.
No. CG variable
Corporation
Bank
Canara
bank PNB
Vijaya
Bank
Syndicate
bank
1 Whether the Quaterly
results disclosed? 100.00 100.00 100.00 100.00 100.00
2
Does the bank disclose
name of the website,
where displayed? 100.00 100.00 100.00 100.00 100.00
3
Whether the official
news releases has been
disclosed? 100.00 100.00 100.00 100.00 100.00
4
Whether the
presentations made to
institutional investors
or to the analysts are
made known? 0.00 100.00 100.00 0.00 0.00
5
Whether management
discussion and analysis
is a part of annual
report or not? 100.00 100.00 100.00 100.00 100.00
6
Whether the Bank has
updated General
Shareholder
information related to:
AGM : Date, time and
venue? 100.00 100.00 100.00 100.00 100.00
7 Financial year 100.00 100.00 100.00 100.00 100.00
8 Date of Book closure 100.00 100.00 100.00 100.00 100.00
9 Dividend Payment
Date 100.00 100.00 100.00 100.00 100.00
10 Listing on Stock
Exchanges Stock Code 100.00 100.00 100.00 100.00 100.00
11
Market Price Data :
High., Low during
each month in last
financial year 100.00 100.00 100.00 100.00 100.00
99
12
Performance in
comparison to broad-
based indices such as
BSE Sensex, CRISIL
index etc. 100.00 100.00 100.00 100.00 100.00
13
Registrar and Transfer
Agents Share Transfer
System 100.00 100.00 100.00 100.00 100.00
14
Distribution of
shareholding
Dematerialization of
shares and liquidity 100.00 100.00 100.00 100.00 100.00
15
Outstanding
GDRs/ADRs/Warrants
or any Convertible
instruments,
conversion date and
likely impact on equity 100.00 100.00 100.00 0.00 0.00
16
Branch locations and
address of
correspondence 100.00 100.00 100.00 100.00 100.00
Corporation bank, Syndicate bank and Vijaya Bank is showing least disclosure for the
information related to presentations made to institutional investors or to the analysts are made
known.
Vijaya Bank has made least disclosure for information related to any special resolutions
passed in the previous 3 AGMs been recorded. In case of information related to outstanding
GDRs/ADRs/Warrants or any Convertible instruments, conversion date and likely impact on
equity Vijaya Bank and Syndicate bank has least disclosure.
Corporation bank, PNB and Syndicate has made least disclosure about the presentations
made to institutional investors or to the analysts are made known.
100
Table: 4.11
Non-Mandatory Requirements: The Board
Sl.
No
Non-Mandatory
Requirements
Corporatio
n
Bank
Canara
Bank PNB
Vijaya
Bank
Syndicat
e Bank
1
Whether A non-executive
Chairman may be entitled
to maintain a Chairman‟s
office at the company‟s
expense? 100.00 100.00 100.00 100.00 85.71
2
Whether they are allowed
reimbursement of
expenses incurred in
performance of his
duties? 100.00 100.00 100.00 0.00 85.71
3
Whether there are any
Independent Directors
who may have a tenure
not exceeding, in the
aggregate, a period of
nine years, on the Board
of a company? 0.00 0.00 0.00 0.00 0.00
The above table shows the disclosure related to the information related to the board
requirement. The information related to the independent directors is showing no disclosure.
Out of five banks Syndicate bank is showing least disclosure related to the board information.
101
Table: 4.12
Non-Mandatory Requirements: Remuneration Committee
Sl.
No
Non-Mandatory
Requirements
Corporation
Bank
Canara
Bank PNB
Vijaya
Bank
Syndicate
Bank
1
Remuneration
Committee:
Whether the board have
set up a remuneration
committee to determine
on their behalf and on
behalf of the
shareholders with agreed
terms of reference, the
company‟s policy on
specific remuneration
packages for executive
directors including
pension rights and any
compensation payment? 100.00 100.00 100.00 100.00 85.71
2
To avoid conflicts of
interest, the remuneration
committee, which would
determine the
remuneration packages
of the executive directors
may comprise of at least
three directors, all of
whom should be non-
executive directors, the
Chairman of committee
being an independent
director Does the Bank
have it? 100.00 100.00 28.57 0.00 85.71
3
Do all the members of
the remuneration
committee be present at
the meeting? 100.00 57.14 28.57 0.00 85.71
Syndicate bank, Vijaya Bank has made the least disclosure of information related to the
remuneration committee.
102
Table: 4.13
Non-Mandatory Requirements: Shareholders Rights
Sl.
No.
Non-mandatory
requirements
Corporation
Bank
Canara
bank PNB
Vijaya
bank
Syndicate
bank
1.
Shareholder Rights
Whether half-yearly
declaration of financial
performance including
summary of the
significant events in
last six-months been
sent to each individual
shareholders? 100.00 100.00 100.00 100.00 85.71
Syndicate bank has made least disclosure for the information related to the shareholder‟s
rights.
Table: 4.14
Non-Mandatory Requirements: Audit Qualification, Training for board members, and
Pear Group of BOD
Sl.
No.
Non-mandatory
requirements
Corporation
Bank
Canara
bank PNB
Vijaya
bank
Syndicate
bank
1
Audit qualifications
Whether the Bank
may move towards a
regime of unqualified
financial statements
stated? 100.00 100.00 28.57 0.00 85.71
2
Does the Bank
conduct training for
its Board members? 85.71 100.00 28.57 0.00 85.71
3
Whether the Bank has
Pear Group of BOD
to evaluate the
performance of non-
executive directors? 71.43 100.00 28.57 0.00 85.71
According to the table 4.14 Vijaya Bank is displaying least disclosure for the all the variable
related to the audit qualifications, training for board members and the pear group of BOD.
103
Table: 4.15
Other Corporate Governance Requirements (A)
Sl.
No.
Other Corporate
Governance Requirements
Corporation
Bank
Canara
Bank PNB
Vijaya
Bank
Syndicate
Bank
1
If the Profile of directors
appointed during the year
mentioned? 100.00 0.00 100.00 100.00 100.00
2
Whether the Bank has
mentioned Code of
conduct? 100.00 0.00 100.00 100.00 42.86
3
Whether the CSR initiatives
taken up by the Bank
mentioned? 85.71 100.00 85.71 71.43 57.14
4 Whether there is disclosure
about risk management? 100.00 100.00 100.00 100.00 100.00
The above reveals that Canara Bank has the least disclosure for the information related to the
profile of directors, code of conduct of bank. Syndicate bank has least disclosure for the CSR
initiatives.
Table: 4.16
Other Corporate Governance Requirements (B)
Sl.
No.
Non-mandatory
requirements
Corporation
Bank
Canara
bank PNB
Vijaya
bank
Syndicate
bank
1
Whether segment wise or
product wise performance
part of MD&A? 100.00 100.00 100.00 100.00 100.00
2 Does the Bank have
nomination committee? 71.43 0.00 71.43 85.71 0.00
3
Whether Auditor‟s
certificate provided by the
Bank? 100.00 100.00 100.00 100.00 100.00
4
Whether CEO or CFO
certificate provided by the
Bank? 100.00 100.00 100.00 100.00 100.00
5
Is the Chairman of the
Board Executive or Non
Executive mentioned? 100.00 100.00 100.00 100.00 85.71
6 Are the Independent
directors well defined? 100.00 0.00 0.00 0.00 0.00
Canara bank and Syndicate bank doesn‟t have disclosure related to nomination committee
since they aren‟t having it in the given time frame. Regarding independent directors been
well defined except Corporation bank no banks have proper disclosure.
104
Table 4.17
Dimension wise analysis of the disclosures of five banks for seven years
Sl. No. Dimension Percent
1 Code of governance 100.00
2 Board of Directors 95.00
3 Audit committee 100.00
4 Remuneration Committee 94.29
5 Shareholders Committee 100.00
6 General Body meetings 48.57
7 Disclosures 90.00
8 Means of Communication 88.00
9 General Shareholder information 96.36
10 Non-Mandatory Requirements 66.57
11 Other Corporate Governance Requirements 79.14
Table 4.17 displays disclosure level for five banks for seven years. According to the Clause
49 the board lays down a code of conduct for all the board members and senior management
of the bank. The code of conduct is posted on the website of the bank. In the present study the
code of governance is showing hundred percent disclosures for all the banks.
Disclosures related to the board of directors includes composition and category of directors,
attendance of each director at the board meetings, number or boards or board committee in
which he or she is a member or chairperson, and number of meetings held, dates on which
held. Board of directors has disclosures of 95%.
Qualified and independent audit committee with financially literate and at least one member
having accounting or related financial management expertise is set up by all the banks
according to the norm. The audit committee is displaying hundred percent disclosures by
banks.
Disclosure in relation to the remuneration committee is showing 94.29%. It reveals
information about the brief description of terms of reference, composition, name of members,
chairperson, attendance during the year, remuneration policy and details of remuneration to
all the directors.
105
Shareholder‟s committee is showing hundred percent disclosures. Shareholders committee
includes the name of non executive director heading the committee, name and designation of
compliance officer, number of shareholders compliant received so far, number not solved to
the satisfaction of shareholders and number of pending complaints.
General Body meetings location and time, where last three AGMs held, whether any special
resolutions passed in the previous 3 AGMs, whether any special resolution passed last year
through postal ballot – details of voting pattern, person who conducted the postal ballot
exercise, whether any special resolution is proposed to be conducted through postal ballot,
procedure for postal ballot shows 48.57% disclosures, though it is mandatory variable the
disclosure level is very low.
Disclosures on materially significant related party transactions that may have potential
conflict with the interests of company at large, Details of non-compliance by the company,
penalties, strictures imposed on the company by Stock Exchange or SEBI or any statutory
authority on any matter related to capital markets, during the last three years, Whistle
Blower policy and affirmation that no personnel has been denied access to the audit
committee and details of compliance with mandatory requirements and adoption of the non
mandatory requirements of clause shows 90% disclosures.
Means of communication with 88% disclosures includes disclosure related to newspapers
wherein results normally published, any website, where displayed whether it also displays
official news releases; and the presentations made to institutional investors or to the analysts.
General shareholder information includes details about the annual general meeting, date,
time venue, financial year, book closure date, dividend payment date, listing on stock
exchanges, stock code, market price data, performance in comparison to broad based indices,
registrar and transfer agents, share transfer system, distribution of shareholding,
dematerialization of shares and liquidity, outstanding Global Depository
Receipts(GDRs)/American Depository Receipts(ADRs), plant location, address for
correspondence. It shows 96.36% disclosures.
106
Non mandatory requirements has 66.57% disclosures includes disclosure related to the board,
about the person who is being appointed as an independent director has the requisite
qualifications and experience which would be of use to the company and which, in the
opinion of the company, would enable him to contribute effectively to the company in his
capacity as an independent director.
Remuneration Committee information under non mandatory requirement includes bank‟s
policy on specific remuneration packages for executive directors including pension rights and
any compensation payment, to avoid conflicts of interest, the remuneration committee, which
would determine the remuneration packages of the executive directors may comprise of at
least three directors.
It also contains information that the members of committee all of whom should be non-
executive directors, the chairman of committee being an independent director, all the
members of the remuneration committee could be present at the meeting, the Chairman of the
remuneration committee could be present at the Annual General Meeting, to answer the
shareholder queries.
The variables of non mandatory requirement includes information about the Shareholder
Rights, Audit qualifications, Training of Board Members, Mechanism for evaluating non-
executive Board Members and Whistle Blower Policy. Other corporate governance
disclosures display 79.14% disclosures.
107
Table: 4.18
CG Variables with hundred percent disclosures
Sl.
No. CG variable
1 Does the bank have brief statement on its philosophy on the code of governance?
2
Board of Directors: Whether the bank have mentioned Composition and category of
directors, for example, promoter, executive, non-executive, independent non-
executive, nominee director, which institution represented as lender or as equity
investor?
3 Does the Bank have attendance of each director at the Board meetings and the last
AGM mentioned in the report?
4 Whether the Bank has mentioned the number of Board meetings held and the date on
which those meetings were held?
5 Audit Committee: Does the Bank have brief description of terms of reference of
Audit committee?
6 Whether the Bank has mentioned the Composition, name of members and Chairperson
of the Audit committee?
7 Have the Meetings and attendance during the year been recorded by the Bank?
8 Remuneration Committee: Does the Bank give brief description of terms of
reference of Remuneration Committee?
9 Shareholders Committee: Whether the name of non-executive director heading the
committee mentioned in the report?
10 Does the Bank mention the name and designation of compliance officer of
Shareholder Committee?
11 Whether the number of shareholders‟ complaints received so far mentioned by the
Bank
12 If the number of complaints not solved to the satisfaction of shareholders mentioned?
13 If the Number of pending complaints mentioned by the Bank?
14 General Body meetings: Does the Bank mention the location and time, where last
three AGMs were held?
15 Does the bank display Newspapers wherein results normally published?
16 Disclosures: Whether disclosures on materially significant related party transactions
that may have potential conflict with the interests of bank at large made?
17
Whether following is included in the disclosure: Details of non-compliance by the
company, penalties, and strictures imposed on the company by Stock Exchange or
SEBI or any other statutory authority, on any matter related to capital markets, during
the last three years?
18 Whether the Details of compliance with mandatory requirements and adoption of the
non-mandatory requirements of this clause given?
19 Means of communication: Whether the Quarterly results disclosed?
20 Does the bank disclose name of the website, where displayed?
21 Whether the official news releases has been disclosed?
22 Whether management discussion and analysis is a part of annual report or not?
23 Whether the Bank has updated General Shareholder information related to: AGM :
Date, time and venue?
24 Financial year
108
25 Date of Book closure
26 Dividend Payment Date
27 Listing on Stock Exchanges Stock Code
28 Market Price Data : High, Low during each month in last financial year
29 Performance in comparison to broad-based indices such as BSE Sensex, CRISIL
index etc.
30 Registrar and Transfer Agents Share Transfer System
31 Distribution of shareholding Dematerialization of shares and liquidity
32 Branch locations and address of correspondence
33 Whether there is disclosure about risk management?
34 Whether segment wise or product wise performance part of MD&A?
35 Whether Auditor‟s certificate provided by the Bank?
36 Whether CEO or CFO certificate provided by the Bank?
The above table displays the hundred percent disclosures of the CG variable of five banks for
seven years. There are thirty six variables which has hundred percent disclosures for all the
seven years.
The checklist method helped to determine the varied percentage of mandatory, non
mandatory and other corporate governance requirements. Out of forty five variables of
mandatory disclosure requirements fifteen variables is showing varied disclosure level.
Bank‟ philosophy of the code displays hundred percent disclosures which envisages and
expects:-adherence to the highest standards of honest and ethical conduct, including proper
and ethical procedures in dealing with actual or apparent conflicts of interest between
personal and professional relationships.
Full, fair, accurate, sensible, timely and meaningful disclosures in the periodic reports
required to be filed by the bank with government and regulatory agencies.
Compliance with applicable laws, rules and regulations.
To address misuse or misappropriations of the bank‟s assets and resources.
The highest level of confidentiality and fair dealing within and outside the banks.
On the basis of the percentage wise analysis of the disclosure of requirements it was found
that following attributes of the corporate governance didn‟t have hundred percent disclosures
for the period 2005 to 2012.
The procedure for postal ballot has the least disclosure made by the bank. The person
who conducts the postal ballot exercise and the special resolution proposed to be
109
conducted through postal ballot shows 20% disclosures however the details of voting
pattern shows 34.29%. The presentation made to the institutional investors or to the
analysts is displaying 40% for seven years. GDRs/ADRs/Warrants or any Convertible
instruments, conversion date and likely impact on equity shows 60% disclosures.
Whistle Blower policy and affirmation that no personnel have been denied access to the
audit committee has 62.86% disclosures, number of other Boards or Board Committees
in which he/she is a member or a Chairperson shows 80% disclosures, disclosures on
materially significant related party transactions that may have potential conflict with the
interests of bank at large made shows 80% disclosures, details of remuneration to all the
directors, as per format in main report has 82.86%, special resolutions passed in the
previous 3 AGMs been recorded has 85.71% disclosures, composition, name of
members and chairperson of remuneration committee mentioned has 91.43%
disclosures, Bank has mentioned the attendance during the year shows 94.29%
disclosure, Remuneration policy of Bank mentioned in the report shows 97.14%
disclosure the details of compliance with mandatory requirements and adoption of the
non-mandatory requirements of this clause given shows 97.14% disclosures.
In the year 2011-12 the mandatory disclosure level of Punjab national bank is highest.
On the basis of the corporate governance report of five banks following non mandatory
variable is been analyzed. In case of non-executive chairman may be entitled to maintain a
chairman's office at the company's expense its is showing 97.14% disclosures, Whether they
are allowed reimbursement of expenses incurred in performance of his duties shows 77.14%
disclosures.
Though non mandatory but it is desirable to have hundred percent disclosures for effective
governance there is no clear disclosure about the independent director which is showing 0%.
The requirements related to board and the shareholder‟s right is showing 97.14% disclosure.
Whether the boards have set up a remuneration committee to determine on their behalf and
on behalf of the shareholders with agreed terms of reference, the company's policy on
specific remuneration packages for executive directors including pension rights and any
compensation payment shows 97.14% disclosures, in case of variable does the Bank have it
provisions to avoid conflicts of interest, the remuneration committee, which would determine
the remuneration packages of the executive directors may comprise of at least three directors,
all of whom should be non-executive directors, the Chairman of committee being an
110
independent director has 62.86% disclosure, members of the remuneration committee be
present at the meeting has 54.29 % disclosure, half-yearly declaration of financial
performance including summary of the significant events in last six-months has been sent to
each individual shareholders has 97.14% disclosure, Bank may move towards a regime of
unqualified financial statements stated in relation to the audit qualification shows 62.86%
disclosure, training for its Board members shows 60.00% disclosure, Pear Group of BOD to
evaluate the performance of non-executive directors shows 57.14% disclosure.
In case of other corporate governance requirements there are four items which have shown
hundred percent disclosures but other six variables is showing less than hundred percent
disclosures. Though the requirement is non mandatory but it is desirable to have disclosure of
above requirements for the effective governance. Is the Chairman of the Board Executive or
Non Executive mentioned shows 97.14% disclosure and if the Profile of directors appointed
during the year mentioned shows 80 % disclosure. Nomination committee plays a vital role
for better governance has 45.71% disclosure level. There is least disclosure about the
independent directors with 20%. It is important have the code of conduct which has only
68.67% of disclosure.
Out of the five bank analyzed each Bank has taken various innovative Corporate Social
Responsibilities initiatives which contributes to the society. It is found that all the five bank
has given ample importance for rural development, education, self employment, healthcare as
important Corporate Social Responsibilities (CSR) initiatives. CSR initiatives show 80%
disclosure level.
4.2.2 CSR INITIATIVES OF NATIONALISED BANKS
Banks consider CSR as an investment in society. An important facet of the corporate
governance is active participation in the community development programmes with corporate
social responsibility. Banks are engaging themselves in various CSR activities which is
indirectly contributing to their increased market performance Rural development is taken as a
major initiatives by the Nationalised banks, apart from education, employment and women
empowerment. Banks need to have proper disclosure and clear CSR strategy for its better
performance.
Canara Bank has hundred percent disclosure level, Corporation bank and Punjab national
bank displays 85.71%, Vijaya Bank has 71.43% since it took the disclosure of CSR initiative
111
from 2006 onwards, and the disclosure level is low in Syndicate Bank due to taking up the
disclosure of CSR initiatives from 2008 onwards. Banks have been doing various activities
which are socially responsible but having proper disclosure in the relevant field helps in
better performance of the Bank in terms of improving its goodwill and reputation.
Important CSR initiatives of bank are analyzed below.
Canara Bank: So far, the Bank has assisted 487 doctors to set up rural clinics in remote
rural areas. The Bank pioneered an innovative scheme called Rural Service Volunteers in
the year 1982. The Jalayoga Scheme was introduced in the year 1996 to commemorate
Bank's 90th year of establishment to provide safe drinking water to Scheduled
caste/Scheduled Tribes/Backward communities of rural areas coming under lead districts
of the Bank. It has set up Rural Resource Development Centre. It has sponsored a Retail
Mobile Marketing Van for Display cum Sale of House hold products, articles made by
Self - Help Groups, Small women entrepreneurs, Artisans, Self Employed women etc.
Canara Bank has been conferred award for its initiatives.
Punjab National Bank: Bank has taken various CSR initiatives such as development of
village Sacha Khera as a Model Village, vocational trainings 3 months‟ duration trainings
on sewing, cutting and embroidery for ladies. Besides, trainings on preparation of home
made goods like pickle, papad etc. are also being organized with the help of NGOs. PNB
regards Corporate Social Responsibility (CSR) as an investment in society. It has
undertaken corporate volunteering where a growing number of our employees are
committed to civic leadership and responsibility.
The Bank has set up numerous training institutes and counselling centres to eradicate
unemployment. It has taken initiatives in health care and education too. It is bagging CSR
awards consistently for its rural development, Self employment, community services,
Sports, Women empowerment and environment concerns. It has disclosed a separate
report on CSR from 2010 onwards.
Corporation Bank: The Bank has also involved itself with several initiatives in the field
of Education, development of infrastructure, rural development, Health and Hygiene and
Promotion of Art and Culture. During the year the Bank initiated several welfare
measures focusing on the basic needs and for the larger benefit of the society, to fulfill its
commitment to social priorities as a responsible.
112
The Bank has extended donations to Jaycees Society for Rehabilitation of the
Handicapped, a school for special children and Malabar Rehabilitation Centre for
Handicapped, Payyanur, a rehabilitation centre for physically handicapped. As part of its
Centenary celebrations, the Bank had launched the project of setting up 100 rural libraries
at identified rural centres across the country, to be developed as Rural Knowledge
Centres, in association with local Village Panchayats/Educational institutions. It has
announced scholarships to pursue higher studies too. The Bank has taken up the project
of developing infrastructure in the campus of Mangalore University-Mangala Gangothri
and extended financial support to Ramakrishna Mission, Mumbai for organizing youth
oriented projects. The Bank also funded the Armed Forces Flag Day in Mumbai and
Mangalore.
Syndicate bank :Syndicate bank has also taken various CSR initiatives such as cleaning
village tanks and ponds, helping flood victims, supporting the cause of gift of vision that
is corneal transplantation in rural areas, providing educational facilities for poor students
in rural areas, serving policemen and their families, free medical facilities for poor by
donating artificial limbs, wheel chair and providing gainful employment for tribal‟s.
Uplift of downtrodden, education for poor students, distribution of free meal to school
children, integrated tribal development, rehabilitation of Endosulfan victims are some of
the other CSR activities of the bank.
Vijaya Bank: Vijaya Bank has earmarked its CSR fund towards rural development,
women empowerment, Self employment, healthcare and literature. It has established rural
Health Centre and provided free services of a doctor and medicines at a Capital cost of
Rs. 10000.00 and a recurring cost of Rs. 15000 per month for each village, adoption of
one girl child with Educational expenses borne by the Bank up to graduation level,
construction of Bus Shelter in the village incurring a cost of Rs. 2 lakh per village,
providing of water tank and construction of flag mast to village schools at a cost of Rs.
20,000 per village. Bank has constructed a bus shelter a cost of Rs. 1.50 Lakhs in
Wazirpur village in Rajasthan state. Besides, Bank also was instrumental in setting up a
Computer training centre at Mangalore for imparting free computer training to the under
privileged children. Bank also provided Cots and essential furniture items to Daari Deepa
Old Age Home at Ramnagara district of Karnataka State. Vijaya Bank has also been
awarded for its CSR initiatives.
113
Out of the five bank analyzed each Bank has taken various innovative CSR initiatives
which contributes to the society. It is found that all the five bank has given ample
importance for rural development, education, self employment, healthcare as important
CSR initiatives.
4.3 ANALYSIS OF BANKS PERFORMANCE
The main focus of this study is to examine the relationship between corporate governance in
the Banks and the Bank performance. An attempt has been made to identify the relationship
between corporate governance proxies and the firm value. In the present study the three
variables are studied. Return on Assets, Capital adequacy ratio and Non-performing Assets
are proxies for asset quality, profitability, and as a measure of supervision of the corporate
governance mechanism. It is helpful in effective supervision of banks, it helps in taking
prompt corrective action and for better compliance.
Capital Adequacy Ratio: It is the ratio of capital fund to risk weighted assets expressed in
percentage terms and is used to check the availability of the bank‟s capital to cover for its
risk-weighted assets. Banks need to maintain CAR at 9% and a higher level of capital funds.
The important objective of CAR is to strengthen the soundness and stability of the banking
system. It is also termed as CRAR that is capital to risk weighted assets ratio. It can be
calculated as follows
TIER 1 Capital = (paid up capital + statutory reserves + disclosed free reserves) - (equity
investments in subsidiary + intangible assets + current & b/f losses)
TIER 2 Capital =Undisclosed Reserves + General Loss reserves + hybrid debt capital
instruments and subordinated debts
Risk can either be weighted assets or the respective national regulator's minimum total capital
requirement. If using risk weighted assets – fund based assets such as cash, loans,
investments and other assets then degrees of credit risk expressed as percentage weights have
been assigned by RBI to each such asset.
114
Return on assets (ROA): The return on assets percentage shows how profitable a company's
assets are in generating revenue. ROA is computed as,
ROA=
Return on assets is an indicator of how profitable a company is before leverage and is
compared with companies in the same industry. Since the figure for total assets of the
company depends on the carrying value of the assets, some caution is required for companies
whose carrying value may not be correspondence to the actual market value. Return on assets
is a common figure used for comparing performance of financial institutions (such as banks),
because the majority of their assets will have a carrying value that is close to their actual
market value. Total assets include fixed assets and assets having interest overdue for more
than 90 days. Banks need to maintain ROA at 0.25%. Higher the proportion of average
earnings assets, better would be the resulting return on assets.
Non Performing Assets (NPA): A non performing asset is used to measure the overall
quality of the bank‟s loan book. Banks need to maintain NPA at 10%. It is calculated as
follows,
NPA=
*Assets having interest overdue for more than 90 days.
With a view to moving towards international best practices and to ensure greater
transparency, 90 days overdue norms for identification of NPAs have been made applicable
from the year ended March 31, 2004. There are certain relaxations mentioned for Tier I
Banks and Tier II Banks as defined below, with effect from March 31, 2004.
As on 2011-12 Nationalised banks had the ROA of 0.88, Capital adequacy ratio of 13.03 and
the NPA of 1.43. According to RBI report 2012 Indian banks need to maintain ratios with the
following benchmarking standard with ROA 0.25 percent, CAR with 9 percent and NPA with
10%.
In order to analyze the effect of corporate governance disclosure level to that of bank
performance in the present study these three dependent variables i.e., Return on Assets,
Capital Adequacy Ratio and Non-performing Assets for the period from 2005 to 2012 is
used.
115
Table: 4.19
NPA as percentage to net advances
Bank/Year 2005
-06
2006-
07
2007
-08
2008-
09
2009
-10
2010-
11
2011
-12 Mean SD CV
Corporation
Bank 0.64 0.47 0.32 0.29 0.31 0.46 0.87 0.48 0.2 0.41
Canara Bank 1.12 0.94 0.84 1.09 1.06 1.1 1.46 1.09 0.18 0.16
Punjab
National
Bank
0.29 0.76 0.64 0.17 0.53 0.85 1.52 0.68 0.41 0.6
Syndicate
Bank 0.86 0.76 0.97 0.77 1.07 0.97 0.96 0.91 0.11 0.12
Vijaya Bank 0.85 0.59 0.57 0.82 1.4 1.52 1.72 1.07 0.44 0.41
Mean 0.75 0.7 0.67 0.63 0.87 0.98 1.31
SD 0.28 0.16 0.22 0.34 0.4 0.34 0.33
CV 0.37 0.23 0.34 0.55 0.45 0.35 0.25
The non performing assets have a major impact on profitability and liquidity of the banks
which in long run affect the goodwill and brand image leading to investor withdrawing their
funds. Based on the mean value Canara bank is showing highest value of 1.09 and
Corporation bank with least mean value 0.48.
From the above table we can conclude that Canara Bank shows a high level of NPA
compared to other banks and Corporation Bank has shown good sign of reduction in the NPA
level for the period of 2005 to 2012. The average level of NPA in the year was 0.75 which
has increased to 1.31 in the year 2012.
116
Table 4.20
Capital Adequacy Ratio
Bank/Year 2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12 Mean SD CV
Corporation
Bank 13.92 12.76 12.09 13.61 15.37 14.11 13 13.55 0.99 0.07
Canara Bank 11.22 13.5 13.25 14.1 13.43 15.38 13.76 13.52 1.15 0.08
Punjab National
Bank 11.95 12.29 13.46 14.03 14.16 14.11 13 13.29 0.84 0.06
Syndicate Bank 11.73 11.74 11.82 12.68 12.7 13.04 12.24 12.28 0.5 0.04
Vijaya Bank 11.94 11.21 11.22 13.15 12.5 13.88 13.06 12 0.75 0.06
Mean 12.15 12.3 12.37 13.51 13.63 14.16 13
SD 0.92 0.79 0.86 0.54 1.05 0.83 0.54
CV 0.08 0.06 0.07 0.04 0.08 0.06 0.04
Capital is essential and critical to the perpetual continuity of a bank as a going concern.
Banks with reasonable CRAR can absorb the unexpected losses easily and their cost of
funding is also reduced which ultimately improve the profitability of banks. Table highlights
the capital adequacy ratio of five banks for seven years. Corporation bank‟s average capital
adequacy ratio for seven year is 13.55 and Vijaya Bank average capital adequacy ratio is 12.
On the basis of the Capital adequacy ratio we can conclude that except Vijaya Bank and
Syndicate Bank other three banks has capital adequacy which is more than 13% where the
Corporation Bank shows high level of capital adequacy ratio. There is increase in the capital
adequacy ratio from 12.15% to 14.16% from 2005 to 2011 however in 2012 capital adequacy
ratio has declined to 13%.
117
Table 4.21
Return on Assets ( ROA In Percentage)
Bank/Year 2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12 Mean SD CV
Corporation
Bank 1.24 1.17 1.29 1.24 1.24 1.21 1.06 1.21 0.07 0.06
Canara
Bank 1.13 0.98 0.92 1.06 1.3 1.42 0.95 1.11 0.17 0.16
Punjab
National
Bank
1.09 1.03 1.15 1.39 1.44 1.34 1.19 1.23 0.15 0.12
Vijaya
Bank 0.45 0.92 0.75 0.59 0.76 0.72 0.66 0.69 0.14 0.2
Syndicate
Bank 0.91 0.91 0.88 0.81 0.62 0.76 0.81 0.81 0.1 0.12
Mean 0.96 1 1 1.02 1.07 1.09 0.93
SD 0.28 0.09 0.19 0.29 0.32 0.29 0.19
CV 0.29 0.09 0.2 0.28 0.3 0.27 0.2
The above table shows the ratio of return on total assets for the period of 2005-12 for five
banks. The average return of the bank is high in case of Punjab National Bank i.e., 1.23% and
least in case of Vijaya Bank. The ratio in terms of dispersion that is Coefficient of Variation
(CV) shows more variable in case of Vijaya Bank and less variable in case of Corporation
Bank.
Therefore in terms of dispersion Vijaya Bank is less consistent and Corporation Bank is more
consistent. The average return of banks was 0.96% in 2005-06 which has decreased to 0.93%
in 2012.
118
Table 4.22
Descriptive Statistics of dependent variables
Based on the descriptive statistics the mean value of the all the five banks is observed in the
below table.
VARIABLE Minimum Maximum Mean Std. Deviation
ROA Corporation Bank 1.06 1.29 1.2071 .07432
ROA Canara Bank .92 1.42 1.1086 .18872
ROA Vijaya Bank .45 .92 .6929 .14762
ROA PNB 1.03 1.44 1.2329 .15777
ROA Syndicate Bank .62 .91 .8143 .10277
CRA Corporation Bank 12.09 15.37 13.5514 1.06651
CRAR Canara Bank 11.22 15.38 13.5200 1.23996
CRAR Vijaya Bank 11.21 13.88 12 1.01775
CRAR PNB 11.95 14.16 13.2857 .90235
CRAR Syndicate Bank 11.73 13.04 12.2786 .53561
NPA Corporation Bank .29 .87 .4800 .21166
NPA Canara Bank .84 1.46 1.0871 .19311
NPA Vijaya Bank .57 1.72 1.0671 .46995
NPA PNB .17 1.52 .6800 .44294
NPA Syndicate Bank .76 1.07 .9086 .11539
The above table depicts the three important triggers ROA, CAR and NPA level of five banks
for seven years. It shows the mean value and the standard deviations. Return on assets of
PNB is highest with mean value of 1.2329 and is lowest for Vijaya Bank with mean value of
.6929. Capital adequacy ratio of Corporation bank is highest with the mean value of 13.5514
and the Vijaya bank has lowest mean value of 12. NPA of Corporation banks shows the mean
value of .4800 which is better compared to other banks and the Canara bank has the highest
NPA level with mean value of 1.0871.
119
4.4 CORPORATE GOVERNANCE DISCLOSURE LEVEL AND BANK
PERFORMANCE
In order to examine the relationship between corporate governance disclosure level and the
performance of the bank‟s annual report the bank performance indicators that is ROA, CAR,
NPA were used and Corporate governance disclosure level of five banks was determined
based on the Corporate governance index prepared using 65 requirements that is mandatory,
non mandatory and other corporate governance requirements.
H0: The extent of corporate governance disclosure level and bank performance is not
related
Table: 4.23
Corporation Bank- Correlation Matrix
CGDI (Corporate governance disclosure index) is expected to have a negative relationship
with bank‟s NPA. To test this relationship Pearson Correlation Matrix analysis was
performed with CGDI and bank‟s NPA for the period 2005–2012. The analysis indicated a
partial strong positive correlation with the selected variables, i.e. r = -0.31798 & p-value =
0.487052 Therefore from the above table it is inferred that in case of Corporation Bank ,
YEAR NPA CAR ROA CGDL CGDL-NPA CGDL-CAR CGDL-ROA
2005-
06 0.64 13.92 1.24 52 r p r p r p
2006-
07 0.47 12.76 1.17 56
-
0.31798 0.487052 -0.01191 0.979782
-
0.09851 0.833577
2007-
08 0.32 12.09 1.29 59
2008-
09 0.29 13.61 1.24 59
2009-
10 0.31 15.37 1.24 59
2010-
11 0.46 14.11 1.21 59
2011-
12 0.87 13 1.06 59
r - Correlation Coefficient, p - Significance Value at 5%
120
CGDI & NPA are showing the same trend & they both move in the same direction exhibiting
a negative relationship. This result is matching with the general expectation which suggests
that, as the CGDI increases the resultant NPA should come down & indicates an
improvement in performance.
CGDI is expected to have a positive relationship with bank‟s CRAR. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s CRAR for the
period 2005–2012. The analysis indicated a negative correlation with the selected variables,
i.e. r = -0.01191& p-value = 0.979782. This result is not matching with the general
expectation which suggests that, as the CGDI increases the resultant CRAR should increase
& reflect an improvement in performance.
CGDI is expected to have a positive relationship with bank‟s ROA. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s ROA for the
period 2005–2012. The analysis indicated a partial strong positive correlation with the
selected variables, i.e. r = -0.09851 & p-value = 0.833577. Therefore from the above table it
is inferred that in case of Corporation Bank CGDI & ROA are not showing the same trend &
they both are not moving in the same direction. They are exhibiting a negative relationship.
This result is not matching with the general expectation which suggests that, as the CGDI
increases the resultant ROA should increase which helps in the improvement in performance.
121
Table 4.24
Canara Bank- Correlation Matrix
YEAR NP
A CAR
RO
A
CGD
L CGDL-NPA CGDL-CAR CGDL-ROA
2005-
06 1.12
11.2
2 1.13 55 r p r p r p
2006-
07 0.94 13.5 0.98 55
0.583588 0.16897 0.65129 0.113047 0.48858 0.265896
2007-
08 0.84
13.2
5 0.92 55
2008-
09 1.09 14.1 1.06 56
2009-
10 1.06
13.4
3 1.3 56
2010-
11 1.1
15.3
8 1.42 56
2011-
12 1.46
13.7
6 0.95 56
r - Correlation Coefficient, p - Significance Value at 5%
CGDI is expected to have a negative relationship with bank‟s NPA. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s NPA for the
period 2005–2012. The analysis indicated a partial strong positive correlation with the
selected variables, i.e. r = 0.583588 & p-value = 0.16897 Therefore from the above table it is
inferred that in case of Canara Bank , CGDI & NPA are not showing the same trend & they
both move don‟t in the same direction exhibiting a negative relationship. This result is not
matching with the general expectation which suggests that as the CGDI increases the
resultant NPA should come down & indicates an improvement in performance.
122
CGDI is expected to have a positive relationship with bank‟s CRAR. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s CRAR for the
period 2005–2012. The analysis indicated a partial strong positive correlation with the
selected variables, i.e. r = 0.651291& p-value = 0.113047. Therefore from the above table it
is inferred that in case of Corporation bank, CGDI & CRAR are showing the same trend &
they both move in the same direction exhibiting a positive relationship. This result is
matching with the general expectation which suggests that, as the CGDI increases the
resultant CRAR should increase & reflect an improvement in performance.
CGDI is expected to have a positive relationship with bank‟s ROA. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s ROA for the
period 2005–2012. The analysis indicated a partial strong positive correlation with the
selected variables, i.e. r =0.488588 & p-value = 0.265896. Therefore from the above table it
is inferred that in case of Canara Bank CGDI & ROA are showing the same trend & they
both move in the same direction exhibiting a moderate positive relationship. This result is
matching with the general expectation which suggests that, as the CGDI increases the
resultant ROA should increase but the improvement in performance is statistically not
significant as it is moderate in its nature.
123
Table 4.25
Punjab National Bank- Correlation Matrix
YEAR NPA CAR ROA CGDL
CGDL-NPA CGDL-CAR CGDL-ROA
r p r p r p
2005-
06 0.29 11.95 1.09 49
0.744 0.054 0.562 0.188 0.399 0.374
2006-
07 0.76 12.29 1.03 53
2007-
08 0.64 13.46 1.15 55
2008-
09 0.17 14.03 1.39 55
2009-
10 0.53 14.16 1.44 55
2010-
11 0.85 14.11 1.34 60
2011-
12 1.52 13 1.19 61
r - Correlation Coefficient, p - Significance Value at 1%
CGDI is expected to have a negative relationship with bank‟s NPA. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s NPA for the
period 2005–2012. The analysis indicated a partial strong positive correlation with the
selected variables, i.e. r = 0.744 & p-value = 0.054. Therefore from the above table it is
inferred that in case of Punjab National bank, CGDI & NPA are showing the same trend &
they both move in the same direction exhibiting a positive relationship. This result is not
matching with the general expectation which suggests that, as the CGDI increases the
resultant NPA should come down & indicates an improvement in performance.
124
CGDI is expected to have a positive relationship with bank‟s CRAR. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s CRAR for the
period 2005–2012. The analysis indicated a partial strong positive correlation with the
selected variables, i.e. r = 0.562 & p-value = 0.188 Therefore from the above table it is
inferred that in case of Punjab National bank, CGDI & CRAR are showing the same trend &
they both move in the same direction exhibiting a positive relationship. This result is
matching with the general expectation which suggests that, as the CGDI increases the
resultant CRAR should increase & reflect an improvement in performance.
CGDI is expected to have a positive relationship with bank‟s ROA. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s ROA for the
period 2005–2012. The analysis indicated a partial strong positive correlation with the
selected variables, i.e. r = 0.399 & p-value = 0.374 Therefore from the above table it is
inferred that in case of PNB CGDI & ROA are showing the same trend & they both move in
the same direction exhibiting a moderate positive relationship. This result is matching with
the general expectation which suggests that, as the CGDI increases the resultant ROA should
increase but the improvement in performance is statistically not significant as it is moderate
in its nature.
125
Table 4.26
Vijaya Bank- Correlation Matrix
CGDI is expected to have a negative relationship with bank‟s NPA. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s NPA for the
period 2005–2012. The analysis indicated a partial strong positive correlation with the
selected variables, i.e. r = 0.204 & p-value = 0.661.Therefore from the above table it is
inferred that in case of Vijaya Bank , CGDI & NPA are showing the same trend & they both
move in the same direction exhibiting a negative relationship. This result is not matching
with the general expectation which suggests that, as the CGDI increases the resultant NPA
should come down. CGDI is expected to have a positive relationship with bank‟s CRAR. To
test this relationship Pearson Correlation Matrix analysis was performed with CGDI and
bank‟s CRAR for the period 2005–2012.
YEAR NPA CAR ROA CGDL CGDL-NPA CGDL-CAR CGDL-ROA
2005-
06 0.85 11.94 0.45 48 r p r p r p
2006-
07 0.59 11.21 0.92 50
0.204 0.661 0.209 0.653 0.725 0.065
2007-
08 0.57 11.22 0.75 50
2008-
09 0.82 13.15 0.59 50
2009-
10 1.4 12.5 0.59 50
2010-
11 1.52 13.88 0.72 50
2011-
12 1.72 13.06 0.66 50
r - Correlation Coefficient, p - Significance Value at 5%
126
The analysis indicated a partial strong positive correlation with the selected variables, i.e. r =
0.209 & p-value = 0.653. Therefore from the above table it is inferred that in case of Vijaya
bank, CGDI & CRAR are showing the same trend & they both move in the same direction
exhibiting a positive relationship. This result is matching with the general expectation which
suggests that, as the CGDI increases the resultant CRAR should increase & reflect an
improvement in performance.
CGDI is expected to have a positive relationship with bank‟s ROA. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s ROA for the
period 2005–2012. The analysis indicated a partial strong positive correlation with the
selected variables, i.e. r = 0.725 & p-value = 0.065. Therefore from the above table it is
inferred that in case of Vijaya Bank‟s CGDI & ROA are showing the same trend & they both
move in the same direction exhibiting a moderate positive relationship. This result is
matching with the general expectation which suggests that, as the CGDI increases the
resultant ROA should increase.
127
Table: 4.27
Syndicate Bank- Correlation Matrix
YEAR NPA CAR ROA CGDL CGDL-NPA CGDL-
CAR CGDL-ROA
2005-
06 0.86 11.73 0.91 42 r p r p r p
2006-
07 0.76 11.74 0.91 52
0.282 0.539 0.571 0.18 -0.471 0.285
2007-
08 0.97 11.82 0.88 52
2008-
09 0.77 12.68 0.81 53
2009-
10 1.07 12.7 0.62 53
2010-
11 0.97 13.04 0.76 55
2011-
12 0.96 12.24 0.81 56
r - Correlation Coefficient, p - Significance Value at 5%
CGDI is expected to have a negative relationship with bank‟s NPA. To test this relationship
Pearson Correlation Matrix analysis was performed with CGDI and bank‟s NPA for the
period 2005–2012. The analysis indicated a positive correlation with the selected variables,
i.e. r = 0.282 & p-value = 0.539. Therefore from the above table it is inferred that in case of
Syndicate Bank, CGDI & NPA are showing the same trend & they both move in the same
direction exhibiting a negative relationship.
This result is not matching with the general expectation which suggests that, as the CGDI
increases the resultant NPA should come down. CGDI is expected to have a positive
relationship with bank‟s CRAR. To test this relationship Pearson Correlation Matrix analysis
was performed with CGDI and bank‟s CRAR for the period 2005–2012. The analysis
indicated a partial strong positive correlation with the selected variables, i.e. r = 0.571 & p-
value = 0.18. Therefore from the above table it is inferred that in case of Syndicate bank,
CGDI & CRAR are showing the same trend & they both move in the same direction
exhibiting a positive relationship. This result is matching with the general expectation which
128
suggests that, as the CGDI increases the resultant CRAR should increase & reflect an
improvement in performance. CGDI is expected to have a positive relationship with bank‟s
ROA. To test this relationship Pearson Correlation Matrix analysis was performed with
CGDI and bank‟s ROA for the period 2005–2012. The analysis indicated a weak correlation
with the selected variables, i.e. r = -0.471 & p-value = 0.285. Therefore from the above table
it is inferred that in case of Syndicate Bank CGDI & ROA are not showing the same trend &
they both are not moving in the same direction exhibiting a negative relationship. This result
is not matching with the general expectation which suggests that, as the CGDI increases the
resultant ROA should increase
When corporate governance disclosure level of individual banks with the bank
performance is correlated there is varied. Using the bank average the correlation results
is shown below.
Table: 4. 28
Bank average- CGDL, ROA, CAR, NPA
Bank CGDL ROA CAR NPA
Corporation Bank 57.57 1.21 13.55 0.48
Canara Bank 55.57 1.11 13.52 1.09
Punjab National Bank 55.43 1.23 13.29 0.68
Vijaya Bank 49.71 0.69 12 1.07
Syndicate Bank 51.86 0.81 12.28 0.91
Table 4.28 displays the bank average of the corporate governance disclosure level and the
three indicators of bank performance which is used to test the hypothesis. Using the above
mean value with the help of SPSS software the bivariate correlation is used to test whether
there is strong or weak correlation between the corporate governance disclosure level and the
bank performance.
129
Table: 4. 29
Correlations – CGDL and Bank Performance
CGDL ROA CAR NPA
CGDL
Pearson Correlation 1 .959**
.972**
-.679
Sig. (2-tailed) .010 .006 .208
N 5 5 5 5
ROA
Pearson Correlation .959**
1 .959**
-.659
Sig. (2-tailed) .010 .010 .226
N 5 5 5 5
CAR
Pearson Correlation .972**
.959**
1 -.510
Sig. (2-tailed) .006 .010 .380
N 5 5 5 5
NPA
Pearson Correlation -.679 -.659 -.510 1
Sig. (2-tailed) .208 .226 .380
N 5 5 5 5
**. Correlation is significant at the 0.01 level (2-tailed).
Based on the mean value of the bank performance and the corporate governance disclosure
level the following results are arrived to check the correlation between the two variables.
Table highlights the correlation between the corporate governance disclosure level and the
bank performance. Using the bivariate correlation in SPSS the results were obtained to check
the relation and strength between the corporate governance disclosure level and the three
triggers of bank performance. However there is a positive correlation with respect to return
on assets and the corporate governance disclosure level with the correlation coefficient of r=
.959*. Corporate governance disclosure level and the Capital adequacy ratio shows the
correlation of .972*
and the Corporate governance disclosure level with that of NPA shows r=
-.679. As per the desired results as the corporate governance disclosure level increases banks
non performing assets decreases. From the above results it can be inferred that the banks with
good corporate governance disclosure level have good performance.
Thus researcher accepts the alternative hypothesis and infers that the good corporate
governance disclosure level helps in better bank performance. Disclosure and transparency
are key indicators of corporate governance. Good disclosure in banks helps banks to increase
the percentage of return on asset, capital adequacy ratio and decrease its non performing
assets.
130
4.5 ANALYSIS OF COMPOSITION OF THE BOARD IN THE CHOSEN BANKS:
The board structure of nationalised banks is based on Banking Companies {Acquisition &
Transfer of undertaking} Act 1970 and Nationalised Bank (Management & Miscellaneous
Provision) Scheme 1970. The board of director of banks shall have an optimum combination
of executive director and non-executive directors with not less than fifty percent of the board
of directors comprising of non executive directors. Under the clause 49 of listing agreement
there is need of seven members out of which four are to be independent directors. In the
below table the composition of board of directors both executive and non-executive director
is highlighted. On the basis of classification of board of directors into executive and non
executive the size of the board is studied for five banks for seven years.
Table: 4. 30
Corporation Bank- Proportion of Executive and Non Executive Directors
Sl.
No. Directors
2005
-06
2006
-07
2007
-08
2008
-09
2009-
10
2010
-11
2011
-12 Average
1 Executive 2 2 1 2 3 3 3 2.29
2 Non –
Executive 10 8 9 12 9 10 8 9.43
3 Total 12 10 10 14 12 13 11 11.71
The above shows that Corporation bank has shown varied number of proportion of
director from 2005 to 2012. The bank shows average number of executive director to be 2.29
and the non executive director is 9.43.
131
Table: 4. 31
Canara Bank- Proportion of Executive and Non Executive Directors
Sl.
No Directors
2005-
06
2006
-07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12 Average
1 Executive 1 1 2 2 2 2 2 1.71
2 Non –
Executive 11 9 11 11 9 9 9 9.86
3 Total 12 10 13 13 11 11 11 11.57
From the above it can be inferred that Canara bank highlights average number of executive
director to be 1.71 and Non –Executive is 9.86 for seven years 2005-2012.
Table: 4. 32
PNB- Proportion of Executive and Non Executive Directors
Sl.
No. Directors
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12 Average
1 Executive 2 2 3 3 3 3 3 2.71
2 Non –
Executive 7 8 9 11 10 10 9 9.14
3 Total 9 10 12 14 10 13 12 11.43
Punjab national bank displays the average number of executive director to be 2.71 and the
non executive director to be 9.14. The average number of director for seven years is 11.43.
132
Table: 4. 33
Vijaya Bank- Proportion of Executive and Non Executive Directors
Sl.
No.
Directors 2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12 Average
1 Executive 2 2 2 2 2 2 2 2
2 Non –
Executive 8 7 8 11 10 9 9 8.85714
3 Total 10 9 10 13 12 11 11 10.8571
Vijaya Bank displays the average number of executive director to be 2 and non executive
director to be 8.857 and the average number of directors to be 10.8571.
Table: 4. 34
Syndicate Bank- Proportion of Executive and Non Executive Directors
Sl.
No. Directors
2005-
06
2006-
07
2007-
08
2008
-09
2009-
10
2010-
11
2011-
12 Mean
1 Executive 1 1 1 2 2 2 2 1.57143
2 Non –
Executive 6 11 11 11 6 9 6 8.57143
3 Total 7 12 12 13 8 11 8 10.1429
Syndicate bank highlights the average number of executive director to be 1.57 and average
number of non executive director to be 8.57 where the total number of director is 10.1429.
Table: 4. 35
Total Number of Directors
Sl
No.
Name of the
Bank
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12 AVERAGE
1 Corporation
Bank 12 10 10 14 12 13 11 11.7143
2 Canara Bank 12 10 13 13 11 11 11 11.5714
3 PNB 9 10 12 14 10 13 12 11.4286
4 Vijaya Bank 10 9 10 13 12 11 11 10.8571
5 Syndicate
Bank 7 12 12 13 8 11 8 10.1429
Table 4.35 highlights the mean value of the number of directors in five banks. Corporation
Bank displays a higher mean value 11.7143 followed by Canara Bank with 11.5714 and PNB
with 11.4286.
133
4.6 NON EXECUTIVE DIRECTORS AND BANK PERFORMANCE
Non executive directors contribute significantly in the decision making process of the board
by providing independent judgement and wider perspectives. Non executive directors need to
ensure that there are no actual and perceived conflicts of interest. Proportion of non executive
directors in the board and its impact on the bank performance is studies in this section
H0: The proportion of non executive directors is not significant to the bank performance
Board of directors is one of the most vital internal governance mechanism which acts as a
bridge between the aspirations of the shareholders and managers. There are mixed views in
various studies in relation to the relation between board size and the performance however in
the present study the presence of non executive directors who are very important to bring in
their rich experience to the management help in the better management of banks.
Non executive directors (NED) contribute significantly in the decision making
process of the board by providing independent judgement and wider perspectives. Non
executive directors need to ensure that there is no actual and perceived conflict of interest.
There are ample research based on the Non executive directors and bank performance. The
present study tries to check the relation and strength between the non executive director and
the bank performance. Using bivariate correlation test the relation between the proportion of
the non executive director and the bank performance with the three triggers RAO, CAR and
NPA was measured which is presented below.
Table: 4.36
Bank Average of Number of Non Executive Directors in the Board
BANK 2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12 AVERAGE
Corporation Bank 10 8 9 12 9 10 8 9.43
Canara Bank 11 9 11 11 9 9 9 9.86
PNB 7 8 9 11 10 10 9 9.14
Vijaya Bank 8 7 8 11 10 9 9 8.86
Syndicate Bank 6 11 11 11 6 9 6 8.57
Average 8.4 8.6 9.6 11.2 8.8 9.4 8.2 9.17
134
Table: 4. 37
Bank Average- NED, ROA, CAR, NPA
Bank NED ROA CAR NPA
Corporation Bank 9.43 1.21 13.55 0.48
Canara Bank 9.86 1.11 13.52 1.09
Punjab National Bank 9.14 1.23 13.29 0.68
Vijaya Bank 8.85714 0.69 12 1.07
Syndicate Bank 8.57143 0.81 12.28 0.91
The above table shows the bank average of non executive directors and the bank performance
indicators. Canara bank has the highest proportion of non executive directors and
Syndicatebank has the lowest proportion of non executive directors.
Table: 4. 38
Descriptive Statistics- NED, ROA, CAR, NPA
N Minimum Maximum Mean Std. Deviation
NED 5 8.57 9.86 9.1717 .50019
ROA 5 .69 1.23 1.0100 .24536
CAR 5 12.00 13.55 12.9280 .73306
NPA 5 .48 1.09 .8460 .26235
Valid N (listwise) 5
135
Table: 4. 39
Correlation matrix- Proportion of non executive directors and bank performance
NED ROA CAR NPA
NED Pearson Correlation 1 .681 .844 -.058
ROA
Pearson Correlation .681 1 .959**
-.659
Sig. (2-tailed) .206 .010 .226
N 5 5 5 5
CAR
Pearson Correlation .844 .959**
1 -.510
Sig. (2-tailed) .072 .010 .380
N 5 5 5 5
NPA
Pearson Correlation -.058 -.659 -.510 1
Sig. (2-tailed) .927 .226 .380
N 5 5 5 5
Non-Executive Director is expected to have a positive relationship with bank‟s performance.
To test this relationship Pearson Correlation Matrix analysis was performed with Non-
Executive Director and bank‟s performance for the period 2005–2012. The analysis indicated
a positive correlation with the selected variables, with respect to the return on asset and the
number of non executive director r = .681, capital adequacy ratio to that of proportion of non
executive director r is 0.844 and Non performing assets and the proportion of non executive
director the correlation coefficient r is -0.58. All the three variables are showing desired
results. There is a strong correlation between the proportion of the non executive directors
and the bank performance.
It is difficult to apportion responsibility on the non executive directors on the bank
performance since they are not the long term employees and they have the term limits. But in
the present study it is inferred that the contribution of the non executive director is
proportionately good in terms of improving the performance of bank.
Hence alternative hypothesis is accepted which states that the proportion of non
executive directors is significant to the bank performance.
136
4.6.1 BOARD COMMITTEES IN BANKS:
Banks are governed by the board and its committees. Committees are the subset of the board.
It helps to improve the effectiveness and the efficiency in making focused decisions. The
governing principle for the constitution of committees enhances qualitative decision making.
Formation of committees is mandatory and voluntary. Mandatory committees are constituted
in compliance with banking companies Act, circular issued by RBI and Government of India
form time to time. Voluntary committees are based on the requirements of banks for better
governance and implementation. The increase in the number of board committees helps in
sharing the responsibilities, involvement of more members and thus examination of the
matter in more details can be done.
Below is the list of Name of committees of five Banks which were analyzed for the study.
Sl. No. Name of the Committee
1. Audit Committee
2. Management committee
3. IT Committee
4. Risk Management Committee
5. Compensation committee
6. Nominations committee:
7. Credit Approval Committee
8. Remuneration committee
9. Customer Service Committee
10. Power of Attorney committee
11. Insurance Joint Venture Committee
12. Steering Committee for Vision 2013
13. Share Transfer Committee
14. Internal Capital Adequacy Assessment Committee
15. Financial inclusion Committee
16. Committee of the board for selection of business and management or
operational commitment for the Bank
137
17. Preferential Allotment committee
18. Departmental promotion committee
19. Special Committee of Board For monitoring fraud cases
20. Asset Liability Management Committee
21. Shareholders/Investors Grievance Committee
22. Committee to monitor large value frauds
23. HR committee
24. Directors Promotion committee
25. Committee for Para Banking activities
26. Amalgamation Committee
27. Committee for Publicity of Budget
28. Special committee to settle election disputes
29. Share Allotment Committee
30. Committee to dispose appeal by employees
31. Credit Approval Committee
32. COD disciplinary action
33. Appellate Authority & Reviewing Authority Committee
34. Steering Committee for IT vision 2013
35. Insurance joint venture committee
35. COB
36. Selection of Business management and operations committee
It is found that bank boards have found it beneficial to establish certain specialized
committees.
1. Audit Committee: It provides oversight of the bank‟s internal and external auditors,
approving their appointment and dismissal, reviewing and approving audit scope and
frequency, receiving the reports and ensuring that management is taking appropriate
corrective actions in a timely manner to address control weaknesses, non-compliance
with policies, laws and regulations, and other problems identified by auditors. The
independence of this committee can be enhanced when it is comprised of external
board members that have banking or financial expertise.
2. The management committee of the Board is constituted in pursuance of Clause 13 of
Nationalised Banks (Management and Miscellaneous provisions) Scheme, 1980 read
138
with the Directives of the Ministry of Finance, Government of India. A management
committee of the Board has been constituted to consider various business matters of
material significance like approval for introduction of new deposit schemes, sanction
of limits whether fund based or non fund based, compromise/write off, sanction of
capital and revenue expenditure, premises, investments, donations etc.,
3. Information Technology Committee: It is constituted to study various aspects of
information security & information technology initiatives and suggest appropriate
measures to strengthen the same in the Bank. The various IT initiatives including the
IT policy and IT expenditure budget are being placed in the quarterly meetings of IT
committee of the Board for information/ discussion/guidance/approval.
4. Risk management committee: It provides oversight of the senior management‟s
activities in managing credit, market, liquidity, operational, legal and other risks of
the bank. (This role should include receiving from senior management periodic
information on risk exposures and risk management activities).
5. Compensation committee: It provides oversight of remuneration of senior
management and other key personnel and ensuring that compensation is consistent
with the bank‟s culture, objectives, strategy and control environment
6. Nominations committee: Nomination Committee has been constituted as per RBI
guidelines to determine the fulfilment of „fit and proper‟ criteria in respect of
Shareholder Director(s) on the Board of Bank. It provides important assessment of
board effectiveness.
7. Credit Approval Committee (CAC): It is constituted to review the credit proposals.
8. Remuneration Committee: It evaluates performance of whole-time Directors (CMD &
EDs) of the Bank to decide entitlement of incentive.
9. Customer Service Committee: It has been constituted to discharge the following
functions:
o Formulation of a Comprehensive Deposit Policy.
o Issues such as the treatment/settlement of account on death of a depositor.
o Product approval process with a view to ensure its suitability and appropriateness
o Annual Survey of depositor satisfaction.
o Examine any other issue having a bearing on the quality of customer service
rendered
139
10. Power of Attorney Committee: The committee grants power of attorney to officers
and employees of the Bank authorizing them to execute documents and represent on
behalf of the Bank Appellate Authority & Reviewing Authority Committee.
11. Insurance Joint Venture Committee: The Committee has been constituted to decide
and recommend to the Board of the Bank, the future course of action in Insurance
business by the Bank.
12. Steering Committee for Vision 2013: The Committee reviews the progress in
implementation of Vision 2013 document and also deliberates upon the requirements
as warranted in the aspects of plan.
13. Share Transfer Committee: The Committee monitors and approves transfers of
physical shares, issuance of duplicate share certificates/new certificates, transmission
of shares, rematerialisation of shares etc.
14. Internal Capital Adequacy Assessment Committee (ICAAP Committee): The Reserve
Bank of India has formulated guidelines in the lines of the new Capital adequacy
framework introduced by Basel II which seeks to enhance the existing Basel 1
practices with an objective of strengthening the soundness and stability of the
Banking system. The objectives of the policy are to ensure management of internal
capital in accordance with the RBI guidelines, Basel II Guidelines and overall
Corporate governance principles, to describe the process for identification,
assessment, measurement and aggregation of the risks inherent in the Bank‟s business
and operations to ensure that the available capital is commensurate with the Bank‟s
risk profile and to ensure that there is clear assignment of roles and responsibilities for
facilitating the ICAAP.
15. Financial inclusion Committee: The committee infuses external and independent
perspective into the planning process and growth strategy by seeking insight into
various growth initiative of the Bank.
16. Committee of the board for selection of business and management or operational
commitment for the Bank: On the basis of open initiative and response received the
evaluation of these bids to be done by this committee.
17. Preferential Allotment committee: It is to consider the issue and allotment of the
equity share to the Government of India, after the proposal is approved by the
shareholders of the Bank at the extra ordinary meeting.
18. Departmental promotion committee- The committee is formed to consider the issues
related to the departmental promotions.
140
19. Special Committee of Board: For monitoring fraud cases: The Committee has been
constituted for monitoring and review of all fraud cases of 1.00 crore and above
20. Asset Liability Management Committee:
The primary goal of this committee is to evaluate, monitor and approve practices
relating to risk due to imbalances in the capital structure. Responsibilities of the
committees include managing market risk tolerances, establishing appropriate MIS,
reviewing and approving the liquidity and funds management policy at least annually,
approving a contingency funding plan, and reviewing immediate funding needs and
sources-possibly engaging an independent third party to validate the assumptions and
data contained in internally or externally prepared management reports.
21. Shareholders/Investors Grievance Committee: It is constituted for the redressal of
investor grievance.
22. Committee to monitor large value frauds: It is to monitor frauds involving amount of
one crore and above in terms of guidelines of RBI.
23. HR committee: To review the human resource system and practices in the Bank.
24. Committee to settle election dispute: A special committee was formed in terms of
clause (b) and (c) of sub section(3) of section of the Banking Companies(Acquisition
and transfer of undertaking).
25. Directors Promotion committee: The Committee considers candidates for promotions
to Top Executive Grade Scale as well as representations of candidates against non-
approval for promotion to Top Executive Grade Scale.
26. Committee for Para Banking activities: A Sub-committee of the Board on Para
Banking Activities is constituted to increase the Para-Banking activities, including
exploring the possibility of venturing into Insurance and Securities, etc.
27. Amalgamation Committee: A special committee to deal with the amalgamation.
28. Special committee to settle election disputes: A special committee in terms of clause
(b) and (c) and subsection(3) of Section 9 of the Banking Companies(Acquisition and
Transfer of Undertakings )Act, 1980 in order to settle the election dispute is formed
29. Share Allotment Committee: In order to allot share on preferential basis bank has
constituted the committee.
30. The Credit Approval Committee (CAC): This committee exercises the powers of the
Board with regard to each credit proposal up to Rupees four hundred crore in case of
"A" category Banks having business of rupees three lakh crore or more.
141
31. Disciplinary action Committee of Directors to review disposal of Vigilance/Non-
vigilance Disciplinary action cases (COD): The Committee reviews disposal of
vigilance and non-vigilance disciplinary action cases on quarterly basis.
32. Appellate Authority Appellate Authority & Reviewing Authority Committee: The
committee has been constituted to act as Appellate Authority/Reviewing Authority in
terms of schedule of Disciplinary Authorities to Bank Officer Employees (Discipline
& Appeal) Regulations, 1977.
33. Steering Committee for IT vision 2013: The Committee reviews the progress in
implementation of Vision 2013 document and also deliberates upon the requirements
as warranted in the aspects of plan.
34. Insurance joint venture committee: The Committee has been constituted to decide and
recommend to the Board of the Bank, the future course of action in Insurance
business by the Bank.
35. Committee of the Board for selection of business/management/operational consultant
for the bank(COB): It is formed in the matter of appointment of
business/management/operational consultants, the guidelines stipulates that the panel
prepared by a committee of the senior officers of the bank of the basis of open
invitation and response received, the evaluation of these bids should be done the
committee of directors of the board which include chairman of the audit committee
and the government officer nominee.
36. Committee of the Board for selection of business/management/operational consultant
for the bank: It is formed in the matter of appointment of
business/management/operational consultants, the guidelines stipulates that the panel
prepared by a committee of the senior officers of the bank of the basis of open
invitation and response received, the evaluation of these bids should be done the
committee of directors of the board which include chairman of the audit committee
and the government officer nominee.
Composition of committees varies from country to country and from bank to bank. The
functioning and composition of the committees receives significant attention. In line with the
requirement of SEBI and RBI the boards have committees such as Audit committee,
Nomination committee, Remuneration committee to monitor the Bank activities for effective
governance. However Banks have incorporated additional committees for effective
governance in the Bank and for smooth functioning. The formation of board committee helps
142
the banks to focus the attention of the bank‟s shareholders grievances and sensitize the
management to redress their grievances. GOI nominates its Officials on the Board of the
Bank who are also nominated on the Committees of the Board; Frequent changes in their
nomination also results in loss of continuity in the Committees of the Board of the Bank
which affects the performance.
4.6.2 NUMBER OF BOARD COMMITTEES IN BANKS:
Even though there is less evidence in support of the board committee and the disclosure level,
it is Laing and weir in the year 1999 reported the evidence to support the relationship
between board committee and bank performance. According to them firms which had
introduced board committees performed better than those without them.
Table: 4. 40
Number of Board Committees in Banks
Sl.
No. Name of the Bank
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
1. Corporation Bank 9 10 11 11 13 14 12
2. Canara Bank 6 6 6 6 6 6 6
3. Punjab National Bank 12 13 15 16 16 15 17
4. Vijaya Bank 8 8 10 11 11 13 13
5. Syndicate Bank 6 7 10 8 9 9 10
Table: 4. 41
Descriptive Statistics – Board committees.
Name Of The
Bank N Minimum Maximum Mean
Std.
Deviation
Corporation Bank 7 9.00 14.00 11.4286 1.71825
Canara Bank 7 6.00 6.00 6.0000 .00000
Punjab National
Bank 7 12.00 17.00 14.8571 1.77281
Vijaya Bank 7 8.00 13.00 10.5714 2.07020
Syndicate Bank 7 6.00 10.00 8.4286 1.51186
Valid N (listwise) 7
143
Formation of board committee is an important aspect of good governance in the banks. Since
separate committee help in focusing on relevant issues and thus helps in better performance.
On the basis of descriptive statistics it is found that the PNB has highest number of board
committee with mean value of 14.8571. Corporation bank with mean value of 11.4286 then it
is Vijaya Bank with 10.5714, Syndicate has the mean value of 8.4286 and lastly it is Canara
bank with six board committees has mean value of 6.
4.6.3 BOARD COMMITTEE AND DISCLOSURE LEVEL:
H0-There is no significant relationship between board committee and the extent of
corporate governance disclosure level
Table: 4. 42
Bank Average: Board Committee and CGDL
Bank CGDL BOC
Corporation Bank 57.57 11.4286
Canara Bank 55.57 6
Punjab National Bank 55.43 14.8571
Vijaya Bank 49.71 10.5714
Syndicate Bank 51.86 8.4286
The above table shows the bank‟s average disclosure level for seven years and the proportion
of board committees.
Based on the mean value of the number of board committees and the corporate governance
disclosure level the Pearson correlation test is used to find the relation between the presence
of board committee and good disclosure level of banks.
144
Table 4.43
Board Committee and CGDL
Correlations
CGDL BOC
CGDL
Pearson Correlation 1 .158
Sig. (2-tailed) .800
N 5 5
BOC
Pearson Correlation .158 1
Sig. (2-tailed) .800
N 5 5
Presence of Board committees helps banks in better disclosures. Using bivariate correlation
in SPSS following results were obtained. The Pearson correlation coefficient value r is .158
which shows weak correlation. Thus it can be inferred that the Proportion or the number of
board committees does not have the major impact on the disclosure level of the banks. Where
it‟s the active participation of the board committee with members of board actively looking
into the day to day affairs of the management the disclosure level can be improvised.
It is inferred that the board committee proportion is not having major impact on the
disclosure level of the bank. Board of the banks need to bear the responsibility to provide
strategic guidance towards better disclosure which affects the bank performance. The board
need to direct its executives by formulating and reviewing policies, plans, set performance
objectives and monitor implementation.
Hence the null hypothesis is accepted which states that there is no significant
relationship between board committee and the extent of corporate governance
disclosure level.
145
4.7 BOARD MEETINGS AND CORPORATE GOVERNANCE DISCLOSURE
LEVEL
Board meetings are important aspect of good governance in banks. Meetings give the
platform for discussion of crucial issues and highlight the performance of banks. Clause 49
specifies at least four meetings to be held in a year.
Table: 4.44
Bank Average of Board meetings
Sl.
No.
Name of the
Bank
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12 Average
1 Corporation
Bank 15 13 12 11 14 15 17 13.86
2 Canara Bank 12 10 13 13 11 11 11 11.57
3 PNB 14 14 14 18 14 14 13 14.43
4 Vijaya Bank 13 9 10 12 12 12 13 11.57
5 Syndicate Bank 7 12 12 13 8 11 8 10.14
Average 12.2 11.6 12.2 13.4 11.8 12.6 12.4
The above table highlights the number of board meetings held in the respective banks for
seven years. The mean value that is average number of meetings varies from 10.14 to 14.43
where Punjab national bank has the highest average Syndicate bank shows the least average
number of board meetings.
Year wise analysis of the board meetings held in the bank shows that though average number
the board meeting was 12.2 in the year 2005-06 increased to 11.6 in the year 2006-07 later it
showed a increase in the trend where again there was slight decline in 2011-12.
146
4.7.1 NUMBER OF BOARD MEETING AND THE CORPORATE GOVERNANCE
DISCLOSURE LEVEL
Board meetings are the forums for board decision making which helps directors to
discharge their responsibilities. The effectiveness of the meeting is based on the agenda and
the sufficient time provided. Meetings of the board enable discussion on matter placed before
them and facilitate decision making based on the collective judgement of the board.
Decisions related to the policy and operations of the bank are arrived at board meeting which
are held periodically.
Table 4.45
Bank average of board meeting and the CGDL:
The mean value of the number of board meeting of all the five banks and the corporate
governance disclosure level is highlighted below
Bank CGDL BOM
Corporation Bank 57.57 13.86
Canara Bank 55.57 11.57
Punjab National Bank 55.43 14.43
Vijaya Bank 49.71 11.57
Syndicate Bank 51.86 10.14
BOM: Board meeting
147
Table: 4. 46
Correlation between Number of Board Meetings and Disclosure Level
CGDL BOM
CGDL
Pearson Correlation 1 .673
Sig. (2-tailed) .213
N 5 5
BOM
Pearson Correlation .673 1
Sig. (2-tailed) .213
N 5 5
r= Pearson Correlation is significant at the 0.05 level (2-tailed)
Board meeting is expected to have a strong relationship with bank‟s corporate disclosure
level. To test this relationship Pearson Correlation Matrix analysis was performed with board
meetings and bank‟s corporate governance disclosure level for the period 2005–2012.
The analysis indicated a positively moderate correlation with the selected variables, i.e. r =
.673. Therefore from the above table it is inferred that in case of banks with increasing number
of board meetings enhances the corporate governance disclosure level to the great extent.
With the increase in the board meeting the board can have ample time to discuss about the
various issues of governance and thus enhances transparency and disclosures.
Thus researcher accepts the alternative hypothesis that there is significant relationship
between board meetings and the extent of corporate governance disclosure level
148
4.8 CORPORATE GOVERNANCE – SHAREHOLDER’S PERSPECTIVE:
Shareholders are important stakeholders of any banks. In the present study corporate
governance is studied from the shareholder‟s perspective. Questionnaire was distributed to
250 respondents where 192 respondents gave back the forms out of which thirty respondents
were selected from each bank which sums up to150 respondents.
The below table highlights the respondents profile.
Respondents Profile:
Table: 4. 47
Classification of the respondents on the basis of the Age
Nationalised Bank 18-30 31-45 46-60 Above 60 Total
Corporation bank 12 10 6 2 30
Canara bank 3 11 15 1 30
PNB 1 20 5 4 30
Vijaya Bank 10 7 13 0 30
Syndicate bank 5 9 11 5 30
Total 31 57 50 12 150
Percent 20.67 38 33.33 8 100
(Source: Field Survey)
Table shows the age wise classification of the respondents. 33.33% of the respondents were
in the age group of 46-60 years. 38% of the respondents were in the age group of 31-45
years. 20.67% of the respondents were in the age group of 18-30 years and 8% were above
60 years. The maximum number of respondents belongs to the age group of 31-45 years.
149
Table: 4. 48
Classification of the respondents on the basis of the gender
Male, Female and transgender are the three important gender classifications. However in the
present study there were no transgender.
Nationalised Bank Male Female Total
Corporation bank 18 12 30
Canara bank 20 10 30
PNB 21 9 30
Vijaya Bank 19 11 30
Syndicate bank 21 9 30
Total 99 51 150
Percent 66% 34% 100%
(Source: Field Survey)
Above table shows the respondents classification based on the gender. 66% of the male and
34% of the female have responded to the questionnaire.
Table 4.49
Classification of the respondents on the basis of the Profession
Nationalised Bank Public
Services
Private
Services Business Student
House
Wife Retired Total
Corporation bank 13 5 7 3 1 1 30
Canara bank 5 14 5 0 2 4 30
PNB 12 11 1 0 3 3 30
Vijaya Bank 14 12 2 0 2 0 30
Syndicate bank 11 13 2 2 1 1 30
Total 55 55 17 5 9 9 150
Percent 36.67% 36.67% 11.33% 3.33% 6% 6% 100%
(Source: Field Survey)
Table 4.49 shows Profession wise shareholders in private service and public service with
36.67% each have responded more compared to other profession.
11.33% of the shareholders are into business. 6% are housewives and retired employees each
and 3.33% are students since they too own share of the banks.
150
Table: 4.50
Classification of the respondents on the basis of the qualification
Sl.
No. Nationalised bank
SSLC-
diploma-PUC UG PG Professionals Total
1 Corporation bank 1 13 14 2 30
2 Canara bank 1 20 6 3 30
3 PNB 0 19 6 5 30
4 Vijaya Bank 4 13 9 4 30
5 Syndicate bank 3 13 12 2 30
Total 9 78 47 16 150
Percentage 6% 52% 31.33% 10.67% 100%
(Source: Field Survey)
There are 52% of shareholders who have responded are having undergraduate degree such as
BA, Bcom, Bsc etc. 31.33% of the shareholders possess Postgraduate degree. 10.67% of the
shareholders are having professional courses and remaining 6% possess SSLC, Diploma and
PUC.
151
Table: 4.51
Shareholders are informed and provided all documents ahead of the General
Shareholders Meeting
Sl. No. Nationalised bank Yes No Total
1 Corporation bank 27 3 30
2 Canara bank 26 4 30
3 PNB 26 4 30
4 Vijaya Bank 29 1 30
5 Syndicate bank 28 2 30
Total 136 14 150
Percent 90.67% 14% 100%
(Source: Field Survey)
The general shareholder‟s meetings provide an opportunity to the shareholder‟s to address
their concerns to the board of directors. It also helps shareholder‟s to seek explanation and
comment on the annual report and the overall functioning of the bank. Effectiveness of the
general shareholder meeting lies in the agenda provided ahead of the meeting. For effective
governance it is necessary that banks keep the shareholders informed about the details about
the bank.
Shareholders have to be informed about the date, time, location and agenda of general
shareholder meetings. It is mandatory to provide to shareholders explanatory details about the
items covered in the agenda along with the notice for the meeting.
Out of the 150 shareholders 90.67% of them agree that they have been informed and provided
all documents ahead of the shareholder‟s meeting. But 14% of the responded that they do not
agree to it.
152
Results of the general shareholder's meeting distributed to shareholders
Table 4.52
Information on Results of the meeting Available upon request
Nationalised
Bank Yes No Total
Corporation bank 1 29 30
Canara bank 2 28 30
PNB 4 26 30
Vijaya Bank 2 28 30
Syndicate bank 2 28 30
Total 11 139 150
Percentage 7.33% 92.67% 100.00%
(Source: Field Survey)
7.33% of shareholders have affirmed that the results are available on request.
Table: 4.53
Information on Results of the meeting sent by courier
Nationalised Bank Yes No Total
Corporation bank 17 13 30
Canara bank 19 11 30
PNB 6 24 30
Vijaya Bank 17 13 30
Syndicate bank 6 24 30
Total 65 85 150
Percentage 43.33 56.67 100.00
(Source: Field Survey)
43.33% of shareholders have affirmed that results are available through courier.
153
Table: 4.54
Information on Results of the meeting Published in the press
Nationalised Bank Yes No Total
Corporation bank 5 25 30
Canara bank 8 22 30
PNB 8 22 30
Vijaya Bank 3 27 30
Syndicate bank 12 18 30
Total 36 114 150
Percentage 24 76 100
(Source: Field Survey)
24% of the shareholders have affirmed that it is published in the press.
Table: 4.55
Information on Results of the meeting sent by mail
Nationalised Bank Yes No Total
Corporation bank 14 16 30
Canara bank 15 15 30
PNB 13 17 30
Vijaya Bank 13 17 30
Syndicate bank 6 24 30
Total 61 89 150
Percentage 40.67 59.33 100.00
(Source: Field Survey)
40.57% affirmed that the results are available through mail.
154
Table: 4.56
Information on Results of the meeting Published on the bank's website
Nationalised Bank Yes No Total
Corporation bank 2 28 30
Canara bank 5 25 30
PNB 7 23 30
Vijaya Bank 2 28 30
Syndicate 5 25 30
Total 21 129 150
Percentage 14 86 100
(Source: Field Survey)
14% shareholders have the opinion that the results are Published on the bank's website.
Out of the five varied way of getting the results of the shareholders meeting maximum
number of shareholders have opted for courier and the mail as the means of getting the
results of the shareholders meeting.
Table 4.57
Bank handles complaints or queries of minority shareholders
Nationalised bank Yes No Total
Corporation bank 29 1 30
Canara bank 27 3 30
PNB 29 1 30
Vijaya Bank 29 1 30
Syndicate bank 27 3 30
Total 141 9 150
Percentage 94% 0.06 100%
(Source: Field Survey)
There are various types of complaints such as not getting dividend in due time once it is approved in
general meeting, not receiving annual reports on time or in terms of not receiving share certificates.
Out of 150 shareholders 94% of the respondents have agreed that the banks handle the complaints
or queries of minority shareholders.
155
Table: 4.58
Bank has a clearly disclosed dividend policy
Nationalised bank Yes No Total
Corporation bank 27 3 30
Canara bank 30 0 30
PNB 29 1 30
Vijaya Bank 29 1 30
Syndicate bank 27 3 30
Total 142 8 150
Percentage 94.67% 5.33% 100%
(Source: Field Survey)
The major concern of the shareholders is the return for their investment that is dividends.
According to the above table 94.67% of the shareholders have agreed that the banks have a
clearly disclosed dividend policy where 5.33% do not agree. 100% shareholders of Canara
bank agree to it. In case of PNB and Vijaya Bank it is 96.70%. 90% of Corporation Bank and
Syndicate bank shareholders have given affirmative response. Shareholders are satisfied in
terms of disclosure of the dividend policy of the respective banks.
Table 4.59
Banks programs or procedures
Nationalised Bank Yes No Total
Corporation bank 11 19 30
Canara bank 23 7 30
PNB 17 13 30
Vijaya Bank 19 11 30
Syndicate bank 9 21 30
Total 79 71 150
Percentage 52.67% 47.33% 100.00%
(Source: Field Survey)
As part of the good governance banks should create awareness among the investors in
relation to its practice of good governance. 52.67% shareholders agree that Banks have
programs or procedures which enable investors to express their views on community issues,
perceived unethical practices, or other concerns.
156
4.8.1 IMPORTANT ATTRIBUTES OF CORPORATE GOVERNANCE:
H0: High disclosure is an important attribute of corporate governance.
The major aspect of the corporate governance is accountability, transparency and the
equitable treatment of the stakeholders. Shareholders were asked to determine important
attributes of corporate governance.
The six attributes of the corporate governance are taken into consideration. They are
Shareholding pattern, appropriate governance structures, Presence of a strong and
independent Board of Directors, Adequate Committee Structure, Means of Communication
and High level of disclosures. The attributes of corporate governance help ensure quality
decision making, encourage effective succession planning for senior management and
enhance long term prosperity of banks.
Six attributes of the corporate governance was marked and based on the likert scale. Each
attribute was rated important, very important, Un important, very un important and neutral.
One sample t test was conducted to determine the importance of each attribute. The following
analysis was drawn based on the test.
157
Table: 4.60 - Important Attributes of Corporate Governance
One-Sample Statistics One-Sample Test
Test Value = 3
Attributes N Mean Std.
Deviation
Std.
Error
Mean
t df Sig. (2-tailed) Mean
Difference
95% Confidence Interval
of the Difference
Lower Upper
Shareholding
patterns 150 2.7267 1.04847 .08561 -3.193 149 .002 -.27333 -.4425 -.1042
Appropriate
governance
structure
150 4.0000 .89742 .07327 13.647 149 .000 1.00000 .8552 1.1448
Presence of a strong
and independent
Board of Directors
150 3.5067 .94653 .07728 6.556 149 .000 .50667 .3540 .6594
Adequate
Committee
Structure
150 3.1600 .96294 .07862 2.035 149 .044 .16000 .0046 .3154
Means of
Communication 150 2.5867 1.04391 .08524 -4.849 149 .000 -.41333 -.5818 -.2449
High level of
disclosures 150 4.4467 .87881 .07175 20.161 149 .000 1.44667 1.3049 1.5885
(Source: Field Survey)
158
The above table reveals that the mean scores for the select attributes range between
2.5867to 4.4467 and the standard deviation being closer to 1 indicates that there are
significant differences among the respondents in their rating towards the CG practices
followed by select Bank as their ratings are slightly inconsistent.
Most of the respondents agree for the attribute that high level of disclosures as
revealed through the highest mean score of 4.4467 followed by agreement to the
attribute that Appropriate governance structure with a mean score of 4 and for all
other statements the mean score of more than 3 indicating the towering presence of
good CG practices except for the attribute Means of Communication which has
observed the lowest mean value of 2.5867 and shareholding pattern with 2.7267.
They also opine that entry of private bank has brought about a positive change in
Bank‟s approach and they are more formidable than any time before.
To test whether the select attributes are significant or not, one sample T test was
conducted and the results are as under.
T test is carried out with assumed mean 3. The total score in the five point scale is 15
and the average is 3. The calculated mean value of select attributes is more than the
assumed mean 3 and the observed P value 0.001 is less than 0.05 in case of
Appropriate governance structure, Presence of a strong and independent Board of
Directors, Adequate Committee Structure Shareholding patterns , Means of
Communication & High level of disclosures.
Thus at 95% confidence interval out of the six attributes High level of disclosures is
considered to be very important attribute for good corporate governance. Thus
shareholders have the opinion that high disclosure is of utmost importance for banks
for their effective governance.
Thus researcher accepts the alternative hypothesis that high disclosure is an important
attribute of corporate governance. The results match with the secondary data analysis
where high disclosure is required for better bank performance. Even shareholders
have opinion that the high disclosure is an important attribute of good governance.
159
4.8.2 SHAREHOLDER’S RIGHTS AND CORPORATE GOVERNANCE
SEBI has consideration for the minority shareholders voting rights. Shareholders need
to view Annual General Meetings seriously because they prove the opportunity for
them to meet and question the board on a wide range of issues affecting the bank.
The following important questions were analyzed from the shareholders perspective
to strengthen their rights. Shareholders when attending an annual general meeting can
actively participate by inquiring any matter pertaining to banks which has been
included in the annual reports of bank. They can raise issues relating to legal and
procedural requirements of general meetings, future direction of the bank, they can
also engage in the frank discussions about the banks performance which helps to exert
pressure on the directors to be more transparent and accountable. At the meeting
shareholders should enquire whether the notice of the meeting was given to them to
regarding the voting rights.
Table 4.61
Shareholders have the right to participate, vote at the general meeting and to be
treated fairly
Nationalised
Bank SD D UN A SA Total
Corporation bank 1 1 0 14 14 30
Canara bank 6 0 3 15 6 30
PNB 2 1 0 23 4 30
Vijaya Bank 2 2 1 10 15 30
Syndicate bank 4 2 4 2 18 30
Total 15 6 8 64 57 150
% 10.00 4.00 5.33 42.67 38.00 100.00
(Source: Field Survey)
(S D stands for Strongly disagree, D= Disagree, UN= Uncertain, A= Agree, SA=
Strongly agree.)
160
According to the legislations shareholder can vote in person or in absentia and both
voting rights are treated equally. Shareholders are given an opportunity to ask any
relevant questions at these general body meetings
Out of 150 shareholders 42.67% of the shareholders agree that they have the right to
participate, vote at the general meeting and to be treated fairly. 38% strongly agree to
it, where 10% of the shareholders disagree, 5.33% have a neutral view they are
uncertain and 4% disagree to it. In the wake of present amendment of the
shareholders right which are increased from one percent to ten percent shareholders
have strong opinion about the increase in their rights to vote at the general meeting.
Table 4.62
Shareholders have the right to be informed on
decisions concerning fundamental corporate changes
Nationalised
Bank SD D UN A SA Total
Corporation
bank 2 0 2 20 6 30
Canara bank 3 1 6 13 7 30
PNB 2 1 1 18 8 30
Vijaya Bank 2 1 8 14 5 30
Syndicate bank 2 1 8 5 14 30
Total 11 4 25 70 40 150
% 7.33 2.67 16.67 46.67 26.67 100.00
(Source: Field Survey)
46.67% shareholders somewhat agree that they have the right to be informed on
decisions concerning fundamental corporate changes. 26.67% of the shareholders
strongly agree and 16.67% neither agree nor disagree. 2.67% shareholders somewhat
disagree and 7.33% shareholders strongly disagree.
161
Table 4.63
Shareholders are provided with adequate information on the agenda items of the
shareholders’ meeting
Nationalised Bank SD D UN A SA Total
Corporation bank 1 0 3 24 2 30
Canara bank 4 3 2 14 7 30
PNB 0 1 2 25 2 30
Vijaya Bank 2 3 5 15 5 30
Syndicate bank 2 2 8 9 9 30
Total 9 9 20 87 25 150
% 6.00 6.00 13.33 58.00 16.67 100.00
(Source: Field Survey)
It is important that the shareholders are provided with adequate information on the
agenda items of the shareholder‟s meeting which helps them to save their time and
come prepare with for the matter of discussion. 58% of the shareholders agree,
16.67% strongly agree to it and 6% of the shareholders strongly disagree and other
6% disagree respectively. 13.33% neither agree nor disagree they are uncertain.
Table 4.64
Adequate time is given for asking questions and placing issues at the
shareholders’ meeting
Nationalised
Bank SD D UN A SA Total
Corporation bank 1 1 8 19 1 30
Canara bank 3 2 5 15 5 30
PNB 2 1 2 25 0 30
Vijaya Bank 7 3 4 10 6 30
Syndicate bank 2 2 8 7 11 30
Total 15 9 27 76 23 150
% 10.00 6.00 18.00 50.67 15.33 100.00
(Source: Field Survey)
50.67% of shareholders agree that adequate time is given for asking questions and
placing issues at the shareholders meeting. 15.33% of the shareholders strongly agree,
10% of the shareholders strongly disagree, 6% disagree and 18% of the shareholders
neither agree nor disagree they are uncertain.
162
Table 4.65
Shareholder’s rights-One-Sample Statistics
Shareholders have the right to participate,
vote at the general meeting and to be
treated fairly
150 3.9467 1.22495 .10002
Shareholders have the right to be informed
on decisions concerning fundamental
corporate changes
150 3.8267 1.08527 .08861
Shareholders are provided with adequate
information on the agenda items of the
shareholders‟ meeting
150 3.7333 1.00780 .08229
Adequate time is given for asking
questions and placing issues at the
shareholders‟ meeting
150 3.5533 1.13242 .09246
(Source: Field Survey)
Table 4.65 reveals that the mean scores for the select shareholder‟s rights range
between 3.5533 to 3.9467 and the standard deviation being more than 1 indicates that
there are less significant differences among the respondents in their rating towards the
shareholder‟s rights followed by select Bank as their ratings are quite consistent.
Table 4.66
Shareholder rights-One-Sample Test
Test Value = 3
t Df Sig. (2-
tailed)
Mean
Difference
Shareholders have the right to
participate, vote at the general
meeting and to be treated fairly
9.465 149 .000 .94667
Shareholders have the right to be
informed on decisions concerning
fundamental corporate changes
9.329 149 .000 .82667
Shareholders are provided with
adequate information on the agenda
items of the shareholders‟ meeting
8.912 149 .000 .73333
Adequate time is given for asking
questions and placing issues at the
shareholders‟ meeting
5.984 149 .000 .55333
(Source: Field Survey)
163
Table 4.67
Shareholders rights- t value
Test Value = 3
95% Confidence
Interval of the
Difference
t Df Sig. (2-
tailed)
Mean
Difference Lower Upper
Shareholders have the
right to participate, vote
at the general meeting
and to be treated fairly
9.465 149 .000 .94667 .7490 1.1443
Shareholders have the
right to be informed on
decisions concerning
fundamental corporate
changes
9.329 149 .000 .82667 .6516 1.0018
Shareholders are
provided with adequate
information on the
agenda items of the
shareholders‟ meeting
8.912 149 .000 .73333 .5707 .8959
Adequate time is given
for asking questions
and placing issues at
the shareholders‟
meeting
5.984 149 .000 .55333 .3706 .7360
(Source: Field Survey)
Most of the respondents agree that the Shareholders rights to be protected by the
banks.
Table 4.67 highlights the statistical significance of Shareholder‟s rights. P value is
less than the alpha at 5% level of significance.
P value 0.002 < 5% level of significance therefore it is statistically significant
shareholder‟s are aware of right to participate, vote at the general meeting and to be
treated fairly.
P value 0.000 < 5% level of significance, therefore Shareholders have the opinion that
their right to be informed on decisions concerning fundamental corporate changes
needs to be protected.
164
P value 0.003 < 5% level of significance level of significance shareholders are
provided with adequate information on the agenda items of the shareholders' meeting.
P value 0.002 < 5% level of significance level of significance adequate time is given
for asking questions and placing issues at the shareholders' meeting.
Due to the controlling shareholders the shareholders would not find it easy to alter the
outcome of decisions made in the shareholders meetings but still with the given rights
they can see that it is enforced. It is inferred that the shareholders rights of banks are
protected. Maximizing shareholder wealth is the corner stone of corporate
governance. Shareholders can contribute towards the corporate governance of the
banks if they exercise their rights appropriately. At the same time banks need to
protect their rights.
4.8.3 TOP REFORM PRIORITIES FOR BANK'S POLICYMAKERS:
Compliance of the corporate governance has been given top priority by the regulatory
bodies with the objective of providing better and effective protection to investors and
also to make the market confident vibrant. Bank policy makers should work on
promoting responsible investment and active ownership by the investors.
Strengthening shareholders rights, improving accounting standards, more effective
disclosure and stronger enforcement are chosen as the top priority for banks
policymaker.
It is often argued that accounting and disclosure rules are good in India and the
problem lies mainly in the enforcement. Banks policy makers must consider the issues
of enforcement since there are mandatory requirements which aren‟t complied by the
banks. Shareholders have responded to the top reform priorities for bank‟s
policymakers.
165
Table 4.68 Canara Bank One-Sample Statistics T test
PRIORITIES
N Mean Std. Deviation Std. Error Mean
Strengthen shareholder rights 30 3.8000 .76112 .13896
Improve accounting standards 30 4.2000 .92476 .16884
More effective disclosure 30 4.2000 .66436 .12130
Stronger Enforcement 30 4.1000 .54772 .10000
One sample statistics results reveal that the shareholders have opted more for improve
accounting standards and more effective disclosures as the top priority for the bank‟s
policy makers.
166
Table 4.69 Canara Bank One-Sample Test
PRIORITIES
Test Value = 3
t df Sig. (2-
tailed)
Mean
Difference
95% Confidence Interval
of the Difference
Lower Upper
Strengthen
shareholder rights 5.757 29 .000 .8000 .5158 1.0842
Improve
accounting
standards
7.107 29 .000 1.2000 .8547 1.5453
More effective
disclosure 9.893 29 .000 1.2000 .9519 1.4481
Stronger
Enforcement 11.000 29 .000 1.1000 .8955 1.3045
The above table depicts the t test value which shows that all the four variables are
statistically significant. According the Canara bank shareholders all the four variables
are significant for banks policy makers.
167
Table 4.70 Syndicate Bank One-Sample Statistics T test
PRIORITIES
N Mean Std.
Deviation
Std. Error
Mean
Strengthen shareholder rights 30 3.8000 .61026 .11142
Improve accounting
standards 30 3.8333 .94989 .17343
More effective disclosure 30 4.1333 .34575 .06312
Stronger Enforcement 30 4.3333 .60648 .11073
The one sample statistics shows that the mean value of the stronger enforcement is
high followed by more effective disclosure and improving accounting standards and
strengthen shareholder rights.
168
Table 4.71 Syndicate bank -One-Sample Test
PRIORITIES
Test Value = 3
t df Sig. (2-
tailed)
Mean
Difference
95% Confidence Interval
of the Difference
Lower Upper
Strengthen
shareholder rights 7.180 29 .000 .8000 .5721 1.0279
Improve
accounting
standards
4.805 29 .000 .8333 .4786 1.1880
More effective
disclosure 17.954 29 .000 1.1333 1.0042 1.2624
Stronger
Enforcement 12.042 29 .000 1.3333 1.1069 1.5598
The above table highlights the respondent‟s opinion about top priorities of bank‟s
policy maker‟s. Out of mean value shareholder‟s have highlighted that stronger
enforcement should be the top priority of the bank‟s policy makers, followed by more
effective disclosure and improving accounting standards and strengthening
shareholder‟s rights.
169
Table 4.72 Vijaya bank - One-Sample Statistics T test
PRIORITIES
N Mean Std. Deviation Std. Error Mean
Strengthen shareholder rights 30 3.0667 1.17248 .21406
Improve accounting standards 30 3.2000 1.09545 .20000
More effective disclosure 30 3.2667 1.38796 .25341
Stronger Enforcement 30 2.8000 1.34933 .24635
Shareholders of Vijaya bank have opted for the more effective disclosure rather than
the stronger enforcement as the bank policy maker‟s top priority.
170
Table 4.73 Vijaya bank One-Sample Test
PRIORITIES
Test Value = 3
t Df Sig. (2-
tailed)
Mean
Difference
95% Confidence Interval
of the Difference
Lower Upper
Strengthen
shareholder rights .311 29 .758 .0667 -.3711 .5045
Improve accounting
standards 1.000 29 .326 .2000 -.2090 .6090
More effective
disclosure 1.052 29 .301 .2667 -.2516 .7849
Stronger
Enforcement -.812 29 .423 -.2000 -.7038 .3038
From the above table it is inferred that the shareholders statistically it is showing
insignificant results that is there are various other factors which affects banks policy
makers decision for effective governance.
171
Table 4.74 PNB One-Sample Statistics T test
PRIORITIES
N Mean Std. Deviation Std. Error Mean
Strengthen shareholder rights 30 4.0000 .00000(a) .00000
Improve accounting standards 30 3.4667 .81931 .14958
More effective disclosure 30 4.4000 .62146 .11346
Stronger Enforcement 30 4.3333 .47946 .08754
The above table states that the maximum numbers of shareholders have opted for
more effective disclosure should be the top priority of bank‟s policy makers.
172
Table 4.75 PNB One-Sample Test
PRIORITIES
Test Value = 3
t df Sig. (2-
tailed)
Mean
Difference
95% Confidence Interval of
the Difference
Lower Upper
Improve accounting
standards 3.120 29 .004 .4667 .1607 .7726
More effective
disclosure 12.339 29 .000 1.4000 1.1679 1.6321
Stronger Enforcement 15.232 29 .000 1.3333 1.1543 1.5124
According to the above table it is inferred that stronger enforcement and more
effective disclosure should be the top priorities of the bank‟s policy makers.
173
Table 4.76 Corporation Bank One-Sample Statistics T test
PRIORITIES
N Mean Std. Deviation Std. Error Mean
Strengthen shareholder rights 30 3.8000 .61026 .11142
Improve accounting standards 30 3.9333 .90719 .16563
More effective disclosure 30 4.1000 .54772 .10000
Stronger Enforcement 30 4.2333 .72793 .13290
The mean value of stronger enforcement, is showing higher mean value followed by
more effective disclosure, improve accounting standards. The mean value to
strengthen shareholder rights is 3.8.
174
Table 4.77 Corporation Bank One-Sample Test
PRIORITIES
Test Value = 3
t df Sig. (2-
tailed)
Mean
Difference
95% Confidence
Interval of the
Difference
Lower Upper
Strengthen
shareholder rights 7.180 29 .000 .8000 .5721 1.0279
Improve
accounting
standards
5.635 29 .000 .9333 .5946 1.2721
More effective
disclosure 11.000 29 .000 1.1000 .8955 1.3045
Stronger
Enforcement 9.280 29 .000 1.2333 .9615 1.5051
The above table highlights the bank‟s policy maker‟s top priorities. Out of mean
value shareholder‟s have highlighted that stronger enforcement should be the top
priority of the bank‟s policy makers, followed by more effective disclosure and
improving accounting standards and strengthening shareholder‟s rights.
Further analysis of the shareholders perspective in group is made which shows that
high disclosure should be the tope priorities of bank‟s policy makers.
175
Table 4.78
Respondents opinion about top reform priorities for bank's policymakers-One-
Sample Statistics
PRIORITIES N Mean Std.
Deviation
Std. Error
Mean
Strengthen shareholder
rights 150 3.6933 .79382 .06482
Improve accounting
standards 150 3.7267 .99594 .08132
More effective
disclosure 150 4.0200 .87830 .07171
Stronger Enforcement 150 3.9600 .98907 .08076
(Source: Field Survey)
One sample statistics show mean value ranging from 3.6933 to 4.0200 where
strengthen shareholders rights has mean value of 3.6933, improve accounting
standards has mean value of 3.7267 , more effective disclosure has mean value of
4.0200 and the stronger enforcement has mean value of 3.9600.
Table 4.79
Respondents opinion about top reform priorities for bank's policy makers : One-
Sample Test
PRIORITIES
Test Value = 3
95% Confidence Interval of the Difference
t df Sig. (2-
tailed)
Mean
Difference Lower Upper
Strengthen
shareholder rights 10.697 149 .000 .69333 .5653 .8214
Improve
accounting
standards
8.936 149 .000 .72667 .5660 .8874
More effective
disclosure 14.223 149 .000 1.02000 .8783 1.1617
Stronger
Enforcement 11.888 149 .000 .96000 .8004 1.1196
(Source: Field Survey)
176
The above table highlights the banks‟ top priorities which shareholders responded. T
test is carried out with assumed mean 3. The total score in the five point scale is 15
and the average is 3. The calculated mean value of select attributes is more than the
assumed mean 3 and the observed P value 0.000 is less than 0.05 in case of
Strengthen shareholder rights, Improve accounting standards, More effective
disclosure and Stronger Enforcement which reveals that they are statistically
significant.
According to the bank shareholders more effective disclosure and stronger
enforcement is to be the top priority of the bank followed by improve accounting
standards and strengthening shareholders rights. The p value for all the five priorities
are less that 5% level of significance which infers that it is statistically significant.
4.8.4 SHAREHOLDER’S OPINION ON CORPORATE GOVERNANCE:
Open ended questions give the respondent the free space to think and express their
opinion without blocking their ideas. The last two questions were asked to elicit the
response from the shareholders regarding the suggestions and the opinion towards the
corporate governance.
The open ended questions were related to:
a) Measures to avoid unethical practices in banks.
b) Corporate governance affecting shareholders investment decision.
a) Measures to Avoid Unethical Practices in Banks
Following are the suggestions made by the shareholders:
1. Shareholder‟s have the opinion that more transparency is required to prevent
the insider trading of the Bank‟s.
2. They have the opinion that there should be ban on sale of shares in open
market.
3. Severe penalty and increase in the prison term is been suggested.
177
4. There need to be complete ban from trading by those officials involved in
unethical practices.
5. Few shareholder‟s have opinion in relation to appointment where the right
people with right attitude need to be employed to avoid such kind of illegal
activity.
6. Few have suggested that banks should try to avoid waiving off the loan
awaited by the corporate and banks need to give importance to social fabric
strata.
7. According to them more effective disclosure and transparency will help in
curbing such activities.
8. Shareholders have the opinion that there is need of improvement in the
accounting standards.
9. Shareholders have the opinion that proper recruitment of qualified people can
solve the issue to maximum extent.
10. There were suggestions from shareholders that even banks need to be banned
which are found mismanaging the fund mere penalty doesn‟t help.
11. In order to avoid unethical practices there is a need for proper and effective
communication.
12. There is a requirement of proper and complete declaration by the officer is
required to avoid such instances.
13. Disclosure needs to certified by due authorities to avoid such mishappenings.
14. There is strong opinion of shareholders that Bank‟s should be delisted from
the stock market if found guilty.
15. Respondents had the opinion that Bank‟s need to strengthen shareholder‟s
rights.
16. There was strong suggestion that minimum prison term of five years for those
involved in unethical practices.
178
b) Corporate Governance Affecting Shareholders Investment Decision
Related to the last question posed to the shareholders there were mixed reaction in
relation to the effect of the corporate governance in their investment decision.
55% expressed their opinion about the positive impact of the corporate governance in
their investment decisions and 45% of the Shareholders have the opinion that
corporate governance does not affect their investment decision.
Shareholders have strong opinion that stronger the corporate governance stronger will
be their desire to invest. According to them good governance is the key to excellently
running banks, and is always required for positive investment decision and they
responded that good communication is the key for good governance.
There was opinion of few shareholders that corporate governance has not much
impact in banking industry as most of the policy decisions are taken by finance
minister and there is political intervention. Shareholder opined that they would
withdraw shares of banks with lack of governance buy additional shares of banks with
good governance.
It‟s the consensus opinion of the shareholders that without proper governance bank
cannot achieve certain goals.