Impact of Corporate Governance on Financial Performance of Nepalese Insurance Company

International Journal of Economics and Management Studies

© 2020 by SSRG - IJEMS Journal

Volume 7 Issue 12

Year of Publication : 2020

Authors : Laxmi Panday, Jyoti Pandey

10.14445/23939125/IJEMS-V7I12P113

How to Cite?

Laxmi Panday, Jyoti Pandey, "Impact of Corporate Governance on Financial Performance of Nepalese Insurance Company," SSRG International Journal of Economics and Management Studies, vol. 7,  no. 12, pp. 83-90, 2020. Crossref, https://doi.org/10.14445/23939125/IJEMS-V7I12P113

Abstract:

This study examines the impact of corporate governance on the performance of Nepalese insurance companies. Return on assets and return on equity are the dependent variables. The independent variable is board size, independent directors, female directors, board meetings, and higher shareholders percentage. This study is based on secondary data collected from 20 insurance companies operated in Nepal from 2012/13 to 2016/17lending to 105 observations. The data were collected from annual reports of selected insurance companies. The regression models are estimated to test the significance and impact of corporate governance and firm performance on other insurance-specific variables on Nepalese insurance companies' performance. The study reveals that board size is positively related to return on assets. It shows that the larger the board size, the higher would be the return on assets. Similarly, the number of the board meeting is positively correlated to return on assets. The result shows that return on assets is positively correlated to the number of female directors in the board, which indicates that the number of female directors on the board leads to an increase in return on assets. Likewise, there is a negative relationship between the percentage of higher shareholders and return on assets, which indicates that the increase in the percentage of higher shareholders leads to a decrease in assets return. Similarly, the study shows that board size is positively related to return on equity. It shows that the larger the board size higher would be the return on equity. Similarly, the number of board meetings is positively correlated to numbers to return on equity. It indicates that an increase in the number of board meetings leads to an increase in equity return. The result shows that return on equity is positively correlated to the number of female directors on the board, which indicates that an increase in the number of female directors on the board leads to an increase in equity. Likewise, the percentage of higher shareholders is positively correlated to return on equity, which indicates that the increase in the percentage of higher shareholders leads to an increase in equity return. The regression results show that the beta coefficients for board size and leverage are positive with return on assets. However, the beta coefficients for the number of board meetings are positive with return on assets. The result also shows that the beta coefficients for board size and the number of independent directors are negative with return on Equity in Nepalese insurance companies.

Keywords:

Return on Assets, Return on Equity, Board size, female directors, independent directors, percentage of higher shareholders, leverage.

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