Analyzing corporate disclosure in Indian banks: assessing compliance, corporate attributes, and performance implications

Figures & data

Table 1. Banking governance reforms in india.

Regulation/Acts	Implemented by	Period of Implementation	Purpose	Literature
Section 35 A of the Banking Regulation Act 1949.	Reserve Bank of India (RBI)	1949	It gives RBI the power to regulate banks.	(Das, 2022; Saldanha & Aranha, 2021)
SEBI Act 1992 and Clause 49, 2006.	Securities and Exchange Board of India (SEBI)	1992 and 2006	Guidelines on Corporate Governance.	(Singla & Singh, 2018; Uzma, 2018)
Code of Corporate Governance 1998, Clause 49.	Confederation of Indian Industries (CII)	1998	Improve governance practices and disclosures in all the listed companies.	(Srivastava et al., 2018; Uzma, 2018)
Corporate Governance Act 1999	Kumar Mangalam Birla Committee	1999	Introduced the principal need to build a governance landscape in India	(Singla & Singh, 2018; Uzma, 2018)
Corporate Audit and Governance 2002	Naresh Chandra Committee Report	2002	Recommendation on Corporate Audit and Governance	(Srivastava et al., 2018)
Committee on Corporate Governance by SEBI, 2003	Narayana Murthy Committee	2003	Evaluate and improve the existing corporate governance practices.	(Srivastava et al., 2018)
Dr Jamshed J. Irani Report (2005).	Ministry of Corporate Affairs, Government of India.	2005	Recommendations on addressing the concerns of stakeholders.	(Hanrahan & Hargovan, 2020; Srivastava et al., 2018)
The Companies Bill, 2009	Ministry of Corporate Affairs, Government of India.	2009	Enables greater shareholder involvement, stringent norms of CG, and additionally, pronounced corporate social responsibility (CSR) initiatives for companies	(Uzma, 2018, Hanrahan & Hargovan, 2020)
The Takeover Code, 2011.	Securities and Exchange Board of India (SEBI)	2011	Increase the measure of transparency and governance	(Naik et al., 2014; Uzma, 2018)
The Companies Act (2013)	Ministry of Company Affairs (MCA)	2013	Regulates Institutions/firms in India.	(Bag & Omrane, 2022; Naik et al., 2014)
Establishment of the Bank Boards Bureau	Government of India.	2016	To improve governance in public sector banks.	(Uzma, 2018; Naik et al., 2014)

Table 2. Details of Banks.

Sr.No	Bank	Category/Sector	Markt Capitalisation (Rs.)
S-1	HDFC Bank	Private	8,11,033.41
S-2	ICICI Bank	Private	5,42,442.58
S-3	State Bank of India	Public	4,67,158.79
S-4	Kotak Mahendra Bank	Private	3,77,053.73
S-5	Axis Bank	Private	2,34,596.58
S-6	Indus Ind Bank	Private	69,989.60
S-7	Bank of Baroda	Public	53,420.17
S-8	IDBI Bank	Public	52,149.15
S-9	Punjab National Bank	Public	44,980.00
S-10	Canara Bank	Public	43,339.57
S-11	Indian Overseas Bank	Public	40,073.11
S-12	Yes Bank	Private	33,448.30
S-13	Union Bank of India	Public	32,157.49
S-14	Bank of India	Public	22,672.20
S-15	Indian Bank	Public	18,694.07

Table 3. Variables of the study.

Variable	Symbol	Data Specification	Reference
Dependent Variable
Disclosure Score	DS	Calculated based on information in annual reports.
Independent Variables
Return on Asset	ROA	$\frac{\mathit{\text{PAT}}}{\mathit{\text{Total Assets}}}$	(Kaur & Vij, 2018)
Return on equity	ROE	$\frac{\mathit{\text{PAT}}}{\mathit{\text{Total AssetsShareholde}}{r}^{\prime }s\mathit{\text{Equity}}}$	(Warrad & Khaddam, 2020)
Capital Adequacy Ratio	CAR	$\frac{\mathit{\text{Tier}} 1 \mathit{\text{capital}}+\mathit{\text{Tier}} 2 \mathit{\text{capital}}}{\mathit{\text{Risk Weighted Assets}}}$	(Al-Homaidi et al., 2020)
Loan to Deposit Ratio	LTD	$\frac{\mathit{\text{Total Loan}}}{\mathit{\text{Total Deposit}}}$	(Ahmed, 2021)
Dividend Pay-out Ratio	DPR	$\frac{\mathit{\text{Dividend Per Share}}}{\mathit{\text{Earnings Per Share}}}$	(Kanojia & Bhatia, 2022)
Debt Equity Ratio	DER	$\frac{\mathit{\text{Long}}-\mathit{\text{Term Debt}}}{\mathit{\text{Equity Shareholde}}{r}^{\prime }s \mathit{\text{Fund}}}$	(Kaur & Vij, 2018)
Cost to Income Ratio	CIR	$\frac{\mathit{\text{Operating Cost}}}{\mathit{\text{Operating Revenue}}}$	(Ahmed, 2021)
Control Variables
Bank Size	Size	$\mathrm{\text{ln}}\hspace{0.17em}\sum \mathit{\text{Total Assets}}$	(Al-Homaidi et al., 2020)
Bank Age	Age	No. of years since inception	(Al-Homaidi et al., 2020)

Table 4. Disclosure parameters.

No	Parameter	Classification
1.1	CAR (%)	Capital
1.2	CRAR - Tier I Capital (%)
1.3	CRAR - Tier II Capital (%)
1.4	Percentage of the shareholding of the Government of India in nationalized banks
1.5	Amount raised by the issue of IPDI
1.6	Amount raised by the issue of Upper Tier II instruments*
2.1	Value of Investments	Investments
2.2	Movement of provisions held towards depreciation on investments
3.1	Securities sold under repos	Repo Transactions
3.2	Securities purchased under reverse repos
4.1	Issuer composition of Non-SLR investments	Non-SLR Investment Portfolio
4.2	Non-performing non-SLR investments
5.1	Forward Rate Agreement/ Interest Rate Swap	Derivatives
5.2	Exchange Traded Interest Rate Derivatives
5.3	Disclosures on risk exposure in derivatives
6.1	Non-Performing Assets	Asset Quality
6.2	Particulars of Accounts Restructured
6.3	Details of financial assets sold to Securitisation/Reconstruction Company for Asset Reconstruction
6.4	Details of non-performing financial assets purchased/sold
6.5	Provisions on Standard Assets
7.1	Interest Income as a percentage of Working Funds $	Business Ratios
7.2	Non-interest income as a percentage of Working Funds
7.3	Operating Profit as a Percentage of Working Funds $
7.4	Return on Assets
7.5	Business (Deposits plus advances) per employee #(Rs.in crore)
7.6	Profit per employee (Rs. in crore)
8	Asset Liability Management Maturity pattern of certain items of assets and liabilities	Asset Liability Management
9.1	Exposure to the Real Estate Sector	Exposures
9.2	Exposure to Capital Market
9.3	Risk Category-wise Country Exposure
9.4	Details of Single Borrower Limit (SGL)/ Group Borrower Limit (GBL) exceeded by the bank.
9.5	Unsecured Advances
10.1	Amount of Provisions made for Income-tax during the year-Provision for Income Tax	Miscellaneous
10.2	Disclosure of Penalties imposed by RBI
11.1	Accounting Standard 5 – Net Profit or Loss for the period, prior period items, and changes in accounting policies.	Additional Disclosure Requirements as per RBI
11.2	Accounting Standard 9 – Revenue Recognition
11.3	Accounting Standard 15 – Employee Benefits
11.4	Accounting Standard 17 – Segment Reporting
11.5	Accounting Standard 18 – Related Party Disclosures
11.6	Accounting Standard 21 – Consolidated Financial Statements (CFS)
11.7	Accounting Standard 22 – Accounting for Taxes on Income
11.8	Accounting Standard 23 – Accounting for Investments in Associates in Consolidated Financial Statements
11.9	Accounting Standard 24 – Discontinuing Operations
11.10	Accounting Standard 25 – Interim Financial Reporting
11.11	Other Accounting Standards
12.1	Provisions and Contingencies	Additional Disclosures
12.2	Floating Provisions
12.3	Draw Down from Reserves
13.1	Customer Complaints	Disclosure of complaints
13.2	Awards passed by the Banking Ombudsman
13.3	Disclosure of Letters of Comfort (LoCs) issued by banks

Table 5. Descriptive statistics of the variables.

Corp Attribute	Banks	S-1	S-2	S-3	S-4	S-5	S-6	S-7	S-8	S-9	S-10	S-11	S-12	S-13	S-14	S-15
	N	10	10	10	10	10	10	10	10	10	10	10	10	10	10	10
DS	Mean	0.91	0.91	0.92	0.86	0.84	0.89	0.89	0.71	0.90	0.87	0.81	0.81	0.84	0.84	0.86
	SD	0.01	0.02	0.02	0.02	0.02	0.04	0.03	0.18	0.03	0.01	0.02	0.10	0.05	0.02	0.06
ROA	Mean	1.69	1.26	0.46	1.71	0.98	1.61	0.24	−1.08	0.15	0.10	−0.73	0.54	0.09	−0.23	0.55
	SD	0.07	0.43	0.34	0.59	0.63	0.27	0.57	1.96	1.01	0.54	1.31	2.19	0.62	0.72	0.39
ROE	Mean	16.62	10.10	7.96	13.86	10.48	15.24	4.11	−12.56	−1.03	1.62	−16.51	10.05	0.43	2.09	9.11
	SD	1.58	3.44	5.83	1.31	6.69	3.23	9.62	28.04	16.77	10.68	20.85	32.74	14.24	13.72	4.88
CAR	Mean	16.30	17.79	12.98	18.26	16.10	14.80	12.92	12.44	12.42	12.22	9.45	16.16	11.69	11.77	13.52
	SD	1.51	1.06	0.59	2.13	1.51	1.47	0.88	1.68	1.68	1.14	2.07	2.93	0.69	1.43	0.86
LTD	Mean	84.41	95.19	44.70	107.78	87.34	85.57	80.17	80.69	73.13	69.83	67.46	69.83	76.08	74.63	72.05
	SD	2.92	9.08	37.89	24.79	6.56	18.49	4.78	4.46	5.01	1.74	11.58	25.39	5.51	18.43	4.73
DPR	Mean	18.95	18.94	11.69	1.88	11.25	11.54	11.29	7.20	6.37	7.79	0.00	4.99	11.31	7.03	12.20
	SD	6.05	11.62	8.19	1.32	10.21	4.15	12.13	9.76	7.04	9.24	0.00	4.89	10.56	9.41	8.91
DER	Mean	0.92	7.20	15.68	3.86	9.5	7.49	15.32	12.02	15.25	16.62	16.36	6.29	17.36	17.27	13.99
	SD	0.20	0.47	1.18	2.19	0.89	4.29	0.86	3.26	1.75	1.09	1.16	4.21	1.46	1.52	0.60
CIR	Mean	39.21	35.96	44.51	49.40	41.14	49.64	38.06	49.44	45.26	33.33	47.30	6.29	46.29	48.18	33.75
	SD	1.15	5.53	8.09	4.55	7.56	13.39	9.47	28.77	4.78	10.13	19.33	4.21	5.48	4.93	6.06

Table 6. Analysis of variance of Disclosure score and Corporate Attributes.

Variables		Sum of squares	df	Mean square	F	Sig	Decision
ROA	Between Groups	39.56	9	4.39	3.27	0.001	Significant variation
	Within Groups	188.19	140	1.34
	Total	227.77	149
ROE	Between Groups	11646.60	9	1294.07	5.81	0.000	Significant variation
	Within Groups	31180.04	140	222.72
	Total	42826.64	149
CAR	Between Groups	80.56	9	8.95	1.105	0.363	No significant variation
	Within Groups	1134.25	140	8.10
	Total	1214.81	149
LTD	Between Groups	3020.167	9	335.57	0.79	0.62	No significant variation
	Within Groups	58970.63	140	421.22
	Total	61990.79	149
DPR	Between Groups	4514.80	9	501.76	7.95	0.00	Significant variation
	Within Groups	8835.46	140	63.11
	Total	13351.27	149
DER	Between Groups	42.033	9	4.67	0.142	0.998	No significant variation
	Within Groups	4601.14	140	32.87
	Total	4643.17	149
CIR	Between Groups	6162.39	9	684.71	4.801	0.000	Significant variation
	Within Groups	19966.20	140	142.62
	Total	26128.59	149

Source. Authors’ calculation.

Table 7. Analysis of variance of the variables of the banks under study.

	Sum of Squares	df	Mean Squares	F(a)(b)	Sig.(a)(b)
Regression	706.020	7	100.86	7.677	0.000^b^***
Residuals	1865.48	142	13.137
Total	2571.50	149

a. Dependent Variable: DS.

b. Predictors: (Constant), CIR, DER, DP, LTD, ROE, CAR, ROA.

**** p ⩽ 0.05; **p ⩽ 0.01; ***p ⩽ 0.001

Table 8. Analysis of coefficients of the dependent and independent variables.

Predictors^a	Unstandardized Coefficients		Standardized Coefficients			95.0% Confidence Interval for B
	B	SE	B	t	Sig^***	Lower Bound	Upper Bound
(Constant)	41.087	3.697		11.115	0.000	33.780	48.395
ROA	1.250	0.560	0.372	2.231	0.027	0.143	2.357
ROE	0.001	0.040	0.005	0.028	0.978	−0.078	0.080
CAR	0.290	0.163	0.199	1.785	0.076	−0.031	0.611
LTD	−0.019	0.016	−0.093	−1.153	0.251	−0.051	0.014
DPR	0.030	0.037	0.069	0.817	0.415	−0.043	0.103
DER	0.175	0.082	0.235	2.118	0.036	0.012	0.337
CITI	−0.049	0.027	−0.156	−1.827	0.070	−0.102	0.004

^a Predictors: (Constant), CIR, DER, DP, LTD, ROE, CAR, ROA.

**** p ⩽ 0.05; **p ⩽ 0.01; ***p ⩽ 0.001

Table 9. Pooled ordinary least square:.

Dependent variable: DS	Model 1: Without interaction	Model 2: With bank size interaction	Model 3: With bank age interaction	Model 4: With interaction
ROA*ROE	−0.0303*** (<0.0001)	0.0022** (0.0395)	−0.0255*** (0.0003)	0.0027*** (0.0084)
CAR	0.3540*** (0.0023)	0.0430** (0.0116)	0.4846*** (<0.0001)	0.0692*** (0.0001)
LTD	−0.0228 (0.1469)	−0.00465 (0.1412)	−0.0038 (0.8174)	−0.0015 (0.5264)
DPR	0.0754** (0.0245)	0.0129*** (0.0084)	0.0729** (0.0248)	0.0131*** (0.0051)
CIR	−0.0458* (0.0734)	0.0093** (0.0135)	−0.0430* (0.0830)	0.0092** (0.0101)
DER	−0.0071 (0.1381)	0.0002 (0.7046)	−0.0052 (0.1188)	0.0004 (0.3533)
Bank Size		36.5907*** (<0.0001)		36.2270*** (<0.0001)
Bank Age			0.0224*** (0.0018)	0.0039*** (0.0002)
Bank Dummy	Yes	Yes	Yes	Yes
Year Dummy	Yes	Yes	Yes	Yes
N	150	150	150	150
R^2	0.7757	0.7851	0.7189	0.7864

p-values are in parenthesis. *^, **^, *** indicate significant at 10%, 5% and 1% level, respectively.

Table 10. Fixed effect regression.

Dependent variable: DS	Model 5 Without interaction	Model 6 With bank size interaction	Model 7 With bank age interaction	Model 8 With interaction
ROA*ROE	−0.0201*** (0.0020)	0.0028*** (0.0040)	−0.0183*** (0.0048)	0.0028*** (0.0037)
CAR	0.2279* (0.0983)	0.0386* (0.0724)	0.2910* (0.0552)	0.0575*** (0.0059)
LTD	−0.0167728 (0.2896)	−0.0038* (0.0968)	−0.0102 (0.5291)	−0.0025* (0.0725)
DPR	0.0370918 (0.2651)	0.0033 (0.4900)	0.0385 (0.2473)	0.0062 (0.1845)
CIR	−0.0709884*** (0.0039)	0.0059* (0.0543)	−0.0705*** (0.0040)	0.0069* (0.0517)
DER	−0.00354773 (0.3574)	0.0006 (0.2593)	−0.0021 (0.5857)	0.0007 (0.1975)
Bank Size		36.2759*** (<0.0001)		36.2181*** (<0.0001)
Bank Age			0.0207* (0.0855)	0.0036**(0.0166)
Bank Dummy	Yes	Yes	Yes	Yes
Year Dummy	Yes	Yes	Yes	Yes
N	150	150	150	150
R^2	0.7077	0.7841	0.7655	0.7843

p-values are in parenthesis. *^, **^, *** indicate significant at 10%, 5% and 1% level, respectively.

Table 11. 2SLS regression.

Dependent variable-DS	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6
constant	48.3794*** (1.12e–114)	32.3235*** (2.46e–09)	46.6936*** (3.46e–059)	29.0963*** (9.29e–01)	70.3923*** (3.63e–013)	77.8656*** (6.95e–018)
ROA*ROE	−0.1877*** (6.94e–05)
CAR		0.8751** (0.0185)
LTD			−0.0282 (0.2123)
DPR				1.6223*** (6.03e–05)
DER					−0.1432*** (0.0027)
CIR						−0.7829*** (0.0002)
Bank Size	0.2977*** (0.0005)	0.2751** (0.0174)	0.0282 (0.0003)	0.0223*** (0.0005)	0.0232*** (0.0002)	0.0229*** (0.0004)
Bank Age	0.1868*** (0.0004)	0.1641*** (0.0006)	0.1291 (0.0003)	0.1234*** (0.0003)	0.1243*** (0.0002)	0.1829** (0.0003)
N	150	150	150	150	150	150
F-Statistics	11.2803	34.5771	13.2669	12.2692	4.03196	5.2969
Prob.(F-Statistics)	0.000042	0.017212	0.2103	0.000036	0.00228	0.000159

DS is regressed against ROA*ROE in Model 1, CAR in Model 2, LTD in Model 3, DPR in Model 4, DER in Model 5, and CIR in Model 6 while controlling for age and size. DS is a measure of corporate disclosure score. P-values are in parenthesis. *^, **^, *** indicates significance at 10%, 5%, 1%.

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