Impact of corporate governance on the financial performance of Nepalese Enterprises
Lilesh Kumar Yadav, LumanaTamrakar, Manika Shrestha and NamrataPandit

Abstract
This paper empirically examines the relationship between corporate governance and performance of Nepalese enterprises. The performance variables used in this study are return on assets and return on equity and these are the dependent variables. The corporate governance variables such as board size, audit committee, board diversity, ownership structure and control variable such as leverage and firm size are the independent variables. The population of this study consists of financial and non- financial companies listed in Nepal Stock Exchange (NEPSE). Total number of 27 financial and non- financial companies listed in Nepal stock exchange for a period of five years from 2011-2015 are used as the sample size. Data are collected from annual report of the respective firms. The pooled cross sectional data analysis has been carried out in this study. The multiple regression models are applied to test the significance and important of corporate governance in the Nepalese firms.
The study reveals that board size, leverage and firm size are positively related to return on assets of non- financial firms. This indicates that large the board, leverage and firm size, higher would be the return on assets. The results also show that there is negative relationship of return on assets with audit committee and board diversity. This indicates that higher the audit committee and board diversity, lower would be the return on assets. There is a positive relationship of return on equity with board size, leverage, firm size, and audit committee and board diversity. In the case of financial firms, the study reveals that there is a positive relationship of return on assets with audit committee and firm size. This indicates that higher the board size, leverage and firm size, higher would be the return on assets. The regression result shows that the board size, leverage and firm has positive impact on return on assets in the case of non-financial firms. Similarly, in the case of financial firm, there is a positive impact of ownership structure, audit committee and firm size on return on assets whereas the coefficients are negative for board size, board diversity and leverage.

Keywords: return on assets, return on equity, board size, ownership structure, audit committee, board diversity, leverage and firm size.

1. Introduction
Corporate governance is the system by which companies are directed and controlled. It is also argued that the corporate governance is the framework by which the interest of various stakeholders is balanced. It shows a set of relationship between a company's management, its board, its shareholder and other stakeholder. Corporate governance provide the mechanism by which the problems of corporation stakeholders, which include the shareholders, creditors, management, employee, consumers and the public at large are framed and resolved. The Organization for Economic Cooperation and Development (OECD) also defines corporate governance as the system by which business corporations are directed and controlled. The Asian Development Bank defined the concept as the manner in which authority is exercised in the management of a country's social and economic resources for development (Eng & Mak, 2003); corporate governance has become a topical issue because of its immense contribution to the economic growth and development of nation. The absence of good corporate governance is a major cause of failure of many well performing companies. Existing literature generally support the position that good corporate governance has a positive impact on organization performance (OECD, 2009). Effective corporate governance has been identified to be critical to all economic transactions especially in emerging and transition economies (Dharwardkar et al., 2000). The concept of corporate governance has been increasing public interest in recent years due to its plausible importance on the economic health of corporation in general.
Good corporate governance practice provides a means to recognize the dreams of justifying risks and optimizing performance concurrently in today's aggressive and regulatory setting. Corporate governance lays down objective framework for creating long term trust between company and its stakeholders. It is solved by rationalizing and monitoring risks of a company, limiting liability of top management by carefully articulating decision making process, ensuring integrity of financial reports, and finally providing a degree of confidence necessary for proper functioning of an