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A non-parametric index of corporate governance in the banking industry: an application to Indian data

Gulati, Rachita, Kattumuri, Ruth and Kumar, Sunil (2019) A non-parametric index of corporate governance in the banking industry: an application to Indian data. Socio-Economic Planning Sciences. ISSN 0038-0121

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Identification Number: 10.1016/j.seps.2019.03.008

Abstract

This paper presents a methodological framework for constructing a non-parametric index of corporate governance for banks. The index is constructed by aggregating six distinct dimensional indices capturing different dimensions of corporate governance, namely board effectiveness, audit function, risk management, remuneration, shareholder rights and information, and disclosure and transparency. For aggregation, a tailored version of data envelopment analysis (DEA) approach which is popularly known as constrained ‘Benefit-of-the-Doubt (BoD)’ model is employed. This approach is unique and distinctive in the sense that it requires no a priori knowledge of weights, and assigns endogenous weights obtained from actual data to individual dimensions of bank governance in order to construct a composite index of corporate governance. This methodological framework has illustrated by applying it for a data set of 40 Indian banks operating in the year 2017. The data set has been compiled using 58 governance regulations as defined by relevant jurisdictions.

Item Type: Article
Additional Information: © 2019 Elsevier Ltd.
Divisions: India Observatory
Social Policy
Subjects: H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
Date Deposited: 12 Apr 2019 11:48
Last Modified: 14 Oct 2019 23:09
URI: http://eprints.lse.ac.uk/id/eprint/100449

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