Did regulatory compliance with governance standards really enhance the profit efficiency of Indian banks?

Rachita Gulati

Macroeconomics and Finance in Emerging Market Economies, 2023, vol. 16, issue 3, 458-484

Abstract: This paper examines whether regulatory compliance with governance norms explains the profit efficiency of Indian banks. Using a data envelopment analysis approach, a compliance index is built on 48 governance norms defined on board, audit, risk, remuneration, shareholder relationship, and disclosures. The study also identifies the position of banks on a 2 × 2 matrix based on their governance and profit efficiency levels. The econometric analysis establishes that mere regulatory compliance with governance codes does not necessarily ensure higher profit efficiency. Instead, the panel quantile estimates uncover evidence of a positive externality to governance compliance for banks with low profit efficiency levels.

Date: 2023
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DOI: 10.1080/17520843.2023.2213943

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