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Women CEOs and financial performance of banks: An empirical research of Indian private sector banks

2014; University of Split, Faculty of Economics; Volume: 19; Issue: 1 Linguagem: Inglês

1846-3363

Arti Chandani, Mita Mehta, B. Neeraja,

Banking Sector Performance and Management

A woman in the workplace is not a new phenomenon, a woman who is a member of the board could be called a moderate phenomenon but a woman who is the CEO is undoubtedly a recent phenomenon, at least in India. At present, the top private sector bank, i.e. ICICI bank, is headed by a woman, Ms. Chanda Kochhar. In addition, the Axis bank, the 3rd largest private sector bank in India is also headed by a woman CEO, Mrs. Shikha Sharma. This paper focuses on women CEOs in the private banking sector and examines, by using financial statement analysis, the impact which women CEOs have had on banks. The performance of the two banks will be compared using the CAMEL ratings. The CAMEL is an acronym where: C stands for Capital, A for Asset quality, M for Management efficiency, E for Earnings and L for Liquidity. This rating system is used for assessing the bank's performance on the basis of its financial, operating and managerial efficiencies.1. INTRODUCTIONThe above quote proves the strength of a woman. Women have assumed a new role in Indian society and Indian economy. Women have started venturing into the fields such as aviation, petroleum industry, finance, etc. which were considered to be the domain of men. The changes have not stopped here and women have gone an extra mile to become entrepreneurs, start ventures and give jobs to others. This is one of the many shifts which India as a country has been experiencing and is slowly embracing. Women and banks share at least one thing, i.e. they are both the critical part of the system. Women are the vital part of the family and banks are the vital part of the economy. The merger of women and banks ought to bring synergy into the system. Though women have been active in the banking and corporate sectors in the past but the increase in the number of women at the top most positions of banks has been a recent activity.The Indian banking sector was revolutionized in the last two decades, remarkably post-liberalization, when the government allowed the private sector to start the banking operations and foreign banks to have the banking operations in India. The liberalization in India enabled for the first time private banks to challenge the public sector, which was previously a monopoly. Private banks had to work hard to lure the customers, which was not an easy task, as Indian customers were used to putting their money into the public sector banks and were not ready to take the risk by switching to private banks. It was difficult for private banks to compete against government banks, which had an advantage just be being government-owned. The banks were not only successful, but also managed to make profit in the initial few years.The opening of the new private sector banks coincided with the liberalization policy of the government and there were many job opportunities in sectors such as information technology, energy, tourism and banking. The female workers used the opportunity and started working in banks and not only to support the family financially but rather took the job where they set new benchmarks and proved themselves to be equally good, if not better than men. This trend continued and the results were seen as early as the start of the 21st century when women were given the most demanding and challenging job i.e. the one of the CEO. The women took the job and passed the test with flying colors, giving impetus to the younger generation and other women to be a part of the success story.Today in India, there are two private banks headed by women, one foreign bank headed by a woman and two public sector banks headed by women. All this proves that women have broken the glass ceiling and entered the elite class of the board room to become the CEOs (Chief Executive Officers) or MDs (Managing Directors). If we take a look all around in India, there are many companies - ranging from pharmaceutical, to insurance, to entertainment companies, which are headed by women. …