Do the Foreign Ownership Perform as a moderator in the Relationship between Corporate Governance and Performance of Indian Banks?

Abstract

Purpose: In light of a several banking scandals, corporate governance has emerged as a critical area of focus. Therefore, this study evaluates the effect of corporate governance on the performance of public and private banks in India by moderating the effect of foreign ownership.

Design/methodology/approach: This research employs the panel data regression model for on data collected from the public and private Indian banks, with 250 observations from FY 2014-2015 to 2023-2024. It takes board size, CEO duality, gender diversity, and board composition as independent, foreign ownership as moderator, and Return on assets and Tobin’s Q as dependent variables.

Findings: The results indicate that when the performance assessed by return on assets (ROA), then only CEO duality and foreign ownership are influencing the performance assessment of Indian banks significantly. On the contrary, when the banking sector performance is measured by Tobin’s q, then only CEO duality is affecting significantly to the Indian banking sector’s performance. Moreover, the findings provide strong evidence regarding the moderation effect of foreign ownership.

Originality/value: After reviewing the literature, the paper underlines limited studies conducted using foreign ownership as a moderator factor while assessing the impact of corporate governance on the performance of Indian banks.