AN ASSESSMENT OF THE IMPACT OF CORPORATE GOVERNANCE PRACTICES ON THE FINANCIAL PERFORMANCE IN THE BANKING SECTOR

Abstract

Corporate governance plays a vital role in shaping financial performance and investor trust in the banking sector by influencing decision-making, risk management, and transparency. This study examines the impact of corporate governance practices on financial performance and assesses their effect on investor trust, focusing on SBI and BoB. A quantitative research approach was adopted, with data collected from 300 investors in the Delhi NCR region between September 2024 and December 2024, including bank customers actively investing in SBI and BoB stocks. A structured questionnaire was used to gather primary data, while secondary data was sourced from bank reports, regulatory filings, and governance disclosures. Structural Equation Modeling (SEM) and regression analysis were applied to evaluate relationships between corporate governance, financial performance, and investor trust. The findings revealed a statistically significant positive relationship, indicating that strong governance frameworks enhance financial stability, profitability, and investor confidence. The study aligns with previous research, confirming that effective governance mechanisms, such as board independence, audit committee effectiveness, and financial transparency, contribute to financial growth and trust in banking institutions. These results have practical implications for banks, regulatory authorities (RBI, SEBI), and investors, emphasizing the need for stronger governance policies, enhanced risk management frameworks, and ethical leadership to ensure financial sustainability and market stability. Future research could explore digital governance innovations, ESG integration in banking governance, and cross-country governance comparisons.