Corporate Governance and Macro-Economic Determinants Effect on Financial Performance: Evidence From Banks in Asian Countries

Abstract

The main purpose of this research is to find the effect of corporate governance and macro- economic determinants on bank’s profitability on banking sector of Asian countries. Three different analyses have been applied in E-views 10 software on panel balance data that are descriptive analysis, correlation matrix and regression equation analysis. Total 24 banks have been selected that include both Islamic and conventional banks from all the ten mentioned countries and 8 years from time period 2010-2017. Data of corporate governance and profitability has been collected from the annual reports of all the banks while the data of macro- economic variables is obtained from CIA world fact book and secondary data is used. Corporate governance and macro-economic determinants are independent variables and financial performance is dependent variable. Sub components of corporate governance are board size, board meeting, audit committee, board independence and components of macro-economic determinants include real gross domestic product and inflation. Financial performance is measured through return on assets and return on equity. Results of this study shows that board size and real gross domestic product has significant relationship with return on assets and return on equity. Board independence and inflation has significant relationship with return on assets and insignificant relationship with return on equity. While Boars meeting and audit committee have insignificant relationship with both dependent variable return on assets and return on equity. Results of this study will help future researchers for deriving useful results. The study will also prove useful for the policy makers of different companies and financial institutions for drawing possible strategies and decisions.