Corporate governance, board responsibilities and financial performance : the National Bank of Australia

Jain, Ameeta and Thomson, Dianne 2008, Corporate governance, board responsibilities and financial performance : the National Bank of Australia, Corporate ownership & control, vol. 6, no. 2, Winter, pp. 99-113.

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Title Corporate governance, board responsibilities and financial performance : the National Bank of Australia
Author(s) Jain, AmeetaORCID iD for Jain, Ameeta
Thomson, DianneORCID iD for Thomson, Dianne
Journal name Corporate ownership & control
Volume number 6
Issue number 2
Season Winter
Start page 99
End page 113
Total pages 15
Publisher Virtus Interpress
Place of publication Sumy, Ukraine
Publication date 2008
ISSN 1727-9232
Keyword(s) bank performance
corporate governance
board dysfunction -- regulation
Summary This paper examines board responsibilities and accountability by management and Board of Directors in relation to the National Australia Bank's (NABs) performance. The NAB, an international financial service provider within the top thirty most profitable banks in the world, is compared with the Australian major banks. The evidence suggests that NABs poor performance was consistent with a lack of accountability, poor corporate governance and board dysfunction associated with fraudulent currency trading and the subsequent AUD360 million foreign currency losses. The NAB's performance is investigated by utilising accounting-based measures of profitability and cost efficiency as proxies for performance. Following the foreign currency trading losses in 2004 the NAB under-performed the other major Australian banks in terms of profits, cost to income ratio and growth in assets. In terms of profitability and cost efficiency NAB had the lowest ROE and ROA with a 19.7% fall in net profit and the highest cost to income ratio of 5 7.4% of any of the five largest banks. This case study provides an Australian example of poor corporate governance and suggests that financial institutions and regulators can learn from the NAB's experience. Failure to have top-down accountability can have significant impact on over-all performance, profitability and reputation. In particular, it suggests that management and Boards need to review their risk management procedures and regulators need to be more pro-active in their prudential oversight of financial institutions.
Language eng
Field of Research 150201 Finance
HERDC Research category C1 Refereed article in a scholarly journal
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Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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