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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10

IN SPECIAL RESPECT OF B ANKING SECTOR ”

Synopsis
On
“Corporate Governance and Market Reaction

with reference to Banking Sector”

Thesis

To be submitted by

Hitendra Motwani

(INC-Ajmer, Enrollment No. 8NBAJ011)

For partial fulfillment of

Master of Business Administration

Of

INC

Under the Guidance of

Mrs. Ritika Moolchandani

(Faculty Guide)

INC-Ajmer Page 1
SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Table of Contents

Title Page No.

Introduction 3

Objectives of the study 5

Description of the problem 6

Justification for the proposed study 7

Database 8

Research Methodology 9

Project Schedule 10

References 11

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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Introduction

Overview of Corporate Governance


“Corporate governance involves a set of relationships between a company‟s management, its
board, its shareholders and other stakeholders. Corporate governance also provides the structure
through which objectives of the company are set, and the means of attaining those objectives and
monitoring performance are determined.”

“By the Organization for Economic Co-operation and Development (OECD)”

In simple words, Corporate Governance is the system by which companies are directed and
controlled. Fundamental objective of corporate governance is the „enhancement of the long-term
shareholder value while at the same time protecting the interests of other stakeholders.”

What is Corporate Governance?


The Manner in which a Corporation is run

- Achieving its Objectives

- Transparency of its Operations

- Accountability & Reporting

- Good Corporate Citizenship

The Processes & Operating Relationships that Best Achieve Organizational Goals

Corporate governance matters for development

1. Increased access to financing  investment, growth, employment

2. Lower cost of capital and higher valuation  investment, growth

3. Better operational performance  better allocation of resources, better management,


creates wealth

4. Less risk, at the firm and country level  fewer defaults, fewer financial crises

5. Better relationship with stakeholders  improved environment, social/labor

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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Overview of Bank Corporate Governance


Effective corporate governance practices are essential to achieving and maintaining public trust
and confidence in the banking system, which are critical to the proper functioning of the banking
sector and economy as a whole. Poor corporate governance may contribute to bank failures,
which can pose significant public costs and consequences due to their potential impact on any
applicable deposit insurance systems and the possibility of broader macroeconomic implications,
such as contagion risk and impact on payment systems. In addition, poor corporate governance
can lead markets to lose confidence in the ability of a bank to properly manage its assets and
liabilities, including deposits, which could in turn trigger a bank run or liquidity crisis. Indeed, in
addition to their responsibilities to shareholders, banks also have a responsibility to their
depositors.

From a banking industry perspective, corporate governance involves the manner in which the
business and affairs of banks are governed by their boards of directors and senior management,
which affects how, they:
- Set corporate objectives
- Operate the bank‟s business on a day-to-day basis
- Meet the obligation of accountability to their shareholders and take into account the
interests of other recognized stakeholders
- Align corporate activities and behavior with the expectation that banks will operate in a
safe and sound manner, and in compliance with applicable laws and regulations; and
protect the interests of depositors.

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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Objectives of the Study

The objectives of my study on “Corporate Governance and Market Reaction in Special respect
of Banking Sector” are as follows:

- To analyze the Risk Management tools in banking Sector

- To know the impact of corporate governance on operations of banking companies

- To conduct comparative performance analysis of Nationalized and Privatized banks

- To know the importance of audit committee, board structures and role of independent
directors in governing the banks

- To know the importance of corporate governance in banks

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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Description of the Problem

The study on “Corporate Governance and Market Reaction in Special respect of Banking
Sector” is being conducted to get the solution of following problems of banking companies:

- Lack of Transparency in Banking operations

- Many banking companies do not follow proper code of conduct and governance

- Problem of insider trading by internal people

- Lack of proper accounting principles

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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Justification for the Proposed Study

The study is to be done on the corporate governance and market reaction in banking sector to
know about the need and importance of corporate governance in banks.

Need of Corporate Governance


- To protect the interest of depositors
- To keep the transparency in the banking operations
- Better corporate governance leads of reduction in cost of capital and vice versa
- Corporate governance helps in reduction in crisis in banks as it supervise and control the
banking operations in ethical manner

Importance of Corporate Governance


- Critical role in the economy
- Safeguard of trust and confidence
- Oversight and monitor the functions

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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Database

In the research study I will collect the data from both the sources as primary source and
secondary source which will help to make my study more effective, correct, efficient and it will
add more value to the study.

Target

- Banks (Nationalized and Private)

Why the researcher targeted them

- To know the importance of corporate governance in banking

How the researcher will do the research

- The researcher will prepare a questionnaire which will be close ended.

- The researcher will target the banks

Methods of Data Collection


Primary Data

Primary data is collected directly from respondents using data collection methods like survey,
interviews, questionnaires, measurements, direct observations or tabulations.

Secondary Data

Secondary data is the data that already exist which has been collected by some other person or
organization for their use and is generally made available to other researchers free or at a
concessional rate. Sources of secondary data include websites, trade associations, journals, books
etc.

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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Research Methodology

Hypothesis
(1) There is positive impact of Corporate Governance on operations banking companies.
(Ho)

(2) There is positive impact of Corporate Governance on customer‟s trust and faith on the
banks. (Ho)

Sample design

- Sample Frame: Ajmer and Chittorgarh

- Sampling tool: Questionnaire (Close Ended)

- Sample Size: 4 Respondents (2 Nationalized and 2 Privatized Banks)

Sampling Distribution: T-Distribution (When sample size is less than 30, T-


distribution is used)

Data collection
Primary Source : Questionnaire (Close Ended)

Secondary Source : Books, Journals, Websites

Research Type : Descriptive

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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Project Schedule

Date Activity
July 13, 2009 (Monday) Commencement of Management Thesis
July 14 – July 15, 2009 Orientation on Management Thesis
Workshop I – Title Finalisation and
July 16 – July 28, 2009
Presentation Of Research Outline
July 29 to July 31, 2009 (Wednesday to Friday) Approval of Title and Synopsis Evaluation
Workshop II – Literature Review & Research
August 10 – September 07, 2009
Design
September 09-18, 2009 (Wednesday to Friday) Interim Evaluation
Workshop III – Data Analysis & Findings of
September 29 – October 23, 2009
Study
November 03 – 12, 2009 (Tuesday to Thursday) Final Evaluation
November 13, 2009 (Friday) End of Management Thesis

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SYNOPSIS ON “CORPORATE GOVERNANCE AND MARKET REACTION MBA 2008-10
IN SPECIAL RESPECT OF B ANKING SECTOR ”

Reference

Websites
- www.wikipedia.com
- http://www.beyondgreypinstripes.org/pdf/CGReport.pdf
- www.indiajuris.com/presentations/CG.ppt
- www.corporatecomplianceinsights.com
- blogs.law.harvard.edu

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