CG Seminar 1B

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WELCOME TO
MGT 631
CORPORATE GOVERNANCE SEMINAR
(1 Credit)
Session 1
By
Radhe S. Pradhan
Copyright by R. S. Pradhan
All rights reserved.
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CG Seminar 1 (Part I)
Radhe S. Pradhan & Som Nath Adhikari (2009),
Corporate Governance and Firm Performance
in Nepal, Management Review, Vol. 1, No.1, pp.
22-26.
The study reveals the existence of the
relationship between CG practices & firm
performance in Nepalese enterprises.
Among others, the companies conducting AGM
on time, financial statement submitted on time
& A Class auditor appointed in a firm, have
higher rates of return & higher MPS.
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With the increase in % of institutional

ownership, public capital & public director, rates
of return & market price of share tends to
increase.
Similarly, with the increase in total assets, and
rate of return, MPS tends to increase, confirming
the size effect on CG.
However increase in leverage of the firm tends
to decrease in firms rates of return & MPS.
Questions
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Table 2 : Collection of data and number of observations
used in the Study
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CG Seminar 1 (Part 2)
Shawgat S. Kutubi , Board of Directors Size,
Independence and Performance: An Analysis of
Private Commercial Banks in Bangladesh.
World Journal of Social Sciences Vol. 1. No. 4.
September 2011. Pp.159-178
This study examines the impact of board size
and independent directors on the performance
of local private commercial banks in
Bangladesh.
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In Bangladesh, the listed companies board of

directors to select an independent director in
the board as at least one tenth (1/10), subject to
a minimum of one person.
The study included 28 (out of 30) commercial
banks operating in the private sector, which are
listed in the two stock exchanges of the
country.
In Bangladesh, under the Bank Companies Act
1991, Bangladesh Bank required the banking
firm to appoint the depositor director from the
depositors (Rule 2008).
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The model:
Dependent variable = a + b1 BS + b2 IF + b3 Size +
b4 Leverage +b5 NPL
Dependent variable: Performance measures
Return on Equity (ROE)
Return on Asset (ROA)
Tobins Q:
Ratio of firm market to book value
measured by the book value of total assets
minus the book value of common equity plus
the market value of common equity divided by
the book value of total assets. (>1 is good).
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Independent variables: Board Characteristics:

Board Size ( BS)
Ratio of Independent Directors( RID)
Control Variables:
ASSETS: The average total assets at the end
of each year.
LEVERAGE: Ratio of total debt plus equity to
the total assets at the end of each year.
NPL: Ratio of non-performing loan to total
loans
Table 3 descriptive statistics: Mean ROE is
0.1845, & Mean of ROA is 0.0149, Tobins Q
mean is 1.1068.
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On average, the BS of the banking sector is 12.99

i.e. 13 (Min 6.4 & Max 17.6).
Average ratio of independent directors is 0.0403
(min zero & max 0.1812).
A positive correlation exists between the ROE
and ROA with board size (BS) but not statistically
significant.
NPL is found negatively correlated with both
ROA & ROE.
Size is positively related to bank performance.\
The study concludes that the inclusion of
independent directors does affect the bank
performance in terms of ROE & ROA.
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Leverage is found to be positively related with

bank performance.
The coefficient of NPL is negative and
statistically significant. This implies that
increase in NPL leads to decrease in ROE of
banking firm.
Table 13: Multiple regression result shows that
BS, RID, Assets, Lratio affect positively on ROA,
but NPL has negative effect.
There is a positive relation between board size
and bank performance in terms of Tobins Q, but
no significant relation in terms of ROE and ROA.
Thanking you
1 - 16
Hypothesis
H1: Bank board size is positively related to
their performance in terms of ROE, ROA, and
Tobins Q.
H2: The proportion of independent directors on
the board is positively related with banks
performance.
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Variables and Statistics

Dependent variable = +1 BS + 2 ID+
3 Size + 4 leverage+ 5 NPL+ .
Table 3: Descriptive Statistics

Varia
bles
ROE
ROA
Tobin BS
sQ
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RID Assets LVR NPL
Mean 0.185 0.015 1.107
12.99 0.04 523177 0.103 0.039

93690
Media 0.190 0.014 1.096

n
13.4
0.03 459522 0.093 0.037

31624
Std.
Dev.
0.069 0.007 0.056
2.69
0.04 319382 0.044 0.021

53696
MIN
0.002 0.001 1.032
6.4
MAX
0.326 0.041 1.267
17.6
0.18 194735 0.263 0.112

498758
268773 0.058 0.006

16778
Table 4:Pearson Pair-Wise Correlation

Matrix of the Variable
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kutubi
Table 12: Anova.
Model
Sum of
squares
df
Mean
Sum of
Square
Sig
1 Regression
0.011
0.002
0.4
0.844(a)
Residual
0.121
22
0.005
Total
0.132
27
a) Predictors: (constant), NPL, Assets , BS, ratio , RID

b) Dependent Variable : ROE
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Coefficients
Model
Constant
BS
Unstandardized
coefficients
B
0.107
Standarized
coefficients
Sig
0.815
0.424
Std. Error
0.132
Beta
0.007
0.250
0.878
0.390
0.487
0.096
0.337
0.740
0.000
0.047
0.229
0.821
0.334
0.040
0.188
0.853
0.683
-0.202
-0.967
0.344
0.007
RID
Assets
0.164
0.000
Lratio
NPL
0.063
-0.661
a) Dependent Variable: ROE

kutubi
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Table 13: Anova.

Model
Sum of
squares
df
Mean
Sum of
Square
1 Regressi
on
0.000
0.000
Residua
l
0.001
22
0.000
Total
0.001
27
Sig
0.539 0.745(a)
a) Predictors: (constant), NPL, Assets , BS, Lratio , RID

b) Dependent Variable : ROA
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Coefficients
Model
Unstandardized
coefficients
Beta
Std. Error
Constant 0.005
BS
0.001
Standarized
coefficients
Sig
0.415
0.682
Beta
0.013
0.001
0.330
1.173
0.253
RID
0.026
0.046
0.160
0.571
0.574
Assets
0.000
0.000
0.004
0.019
0.985
Lratio
0.005
0.032
0.031
0.146
0.885
NPL
-0.066
0.065
-0.209
-1.018
0.320
a) Dependent Variable: ROA

kutubi
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Table 14: Anova.

Model
Sum of
squares
df
Mean
Sum of
Square
1 Regressi
on
0.023
0.005
Residua
l
0.062
22
0.003
Total
0.084
27
Sig
1.631 0.194(a)
a) Predictors: (constant), NPL, Assets , BS, Lratio , RID

b) Dependent Variable : Tobins Q
Coefficients
Model
Unstandardized
coefficients
Standarized
coefficients
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Sig
Std. Error
0.094
Beta
11.568
0.000
-0.002
0.005
-0.090
-0.352
0.728
RID
0.46
0.348
0.335
1.322
0.200
Assets
0.0
0.000
-0.126
-0.685
0.500
Lratio
0.010
0.238
0.008
0.043
0.966
NPL
0.890
0.488
0.339
1.823
0.082
Constant
Beta
1.088
BS
a) Dependent Variable: Tobins Q
Thanking you

CG Seminar 1B

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1-1

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With the increase in % of institutional

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In Bangladesh, the listed companies board of

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Independent variables: Board Characteristics:

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On average, the BS of the banking sector is 12.99

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Leverage is found to be positively related with

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Variables and Statistics

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Table 3: Descriptive Statistics

Mean 0.185 0.015 1.107

12.99 0.04 523177 0.103 0.039

Media 0.190 0.014 1.096

0.03 459522 0.093 0.037

0.069 0.007 0.056

0.04 319382 0.044 0.021

0.002 0.001 1.032

0.326 0.041 1.267

0.18 194735 0.263 0.112

268773 0.058 0.006

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Table 4:Pearson Pair-Wise Correlation

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a) Predictors: (constant), NPL, Assets , BS, ratio , RID

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a) Dependent Variable: ROE

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Table 13: Anova.

a) Predictors: (constant), NPL, Assets , BS, Lratio , RID

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a) Dependent Variable: ROA

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Table 14: Anova.

a) Predictors: (constant), NPL, Assets , BS, Lratio , RID

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a) Dependent Variable: Tobins Q

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