Corporate governance is an umbrella term encompassing the economic, legal and institutional effort that allows companies to diversify, grow, restructure or exit and do everything that is necessary to maximize shareholder value. According to Shleifer and Vishny (1997), corporate governance deals with the ways that suppliers of finance to corporations assure themselves of getting a return on their investment. `Doing everything better' is how corporate governance is defined today. As the Nobel laureate Milton Friedman observed, today corporate governance has become much more than the conduct of business in accordance with shareholders' desires.

It has become synonymous with a system of making a corporate both a powerful economic entity and an important social institution that uses its economic power to add value to society in general and investors in particular. This new moral contract between the corporate, the individual investor and the society is essentially aimed at transforming the corporates into value-creating institutions.

Commercial banks pose unique corporate governance problems, for the number of parties with a stake in an institution activity complicates the governance requirements. Besides investors, there are the depositors and regulators who have a direct interest in bank performance. The regulators are concerned about the effect of corporate governance on the performance of banks since the health of the overall economy rests on their performance.

That aside, in many developing economies, government ownership of banks is a common feature (La Porta et al., 2002). With a government-owned bank, the severity of the conflict between depositors and managers heavily rests on the credibility of the government (T G Arun and J D Turner). Another serious problem that government-owned banks face is the conflict between themselves and the bureaucrats who control the banks. Bureaucrats may seek to advance their political careers by catering to special interest groups such as trade unions (Shleifer and Vishny, 1997, p. 768).

That being the complexity of corporate governance in the banking industry, its operation in banks has attracted attention of many researchers. Against this backdrop, the authors Srinivas Nippani, Ram S Vinjamury and Chenchuramaiah Bathala of the first paper in the issue, "Bank Size and Corporate Governance Structure", have studied the corporate governance structures in the American banking industry. They have assessed the impact of four major corporate governance characteristics, namely Board Mechanism, Compensation Structure, Takeover Defense Mechanism and Audit Committee Structure on the mean stock market returns for a sample of 542 banks for the year 2003 and presented the findings. The authors have noticed significant differences in governance structures of the banks depending on their size. It is also found that the stock market returns are significantly influenced by board composition while the other three parameters have no bearing on the returns to the stock holders.

The authors Sunil Kumar and Rachita Gulati of the second paper, "The Impact of Size and Group Affiliation on Technical Efficiency of Indian Public Sector Banks: An Empirical Investigation", have evaluated the impact of the size and group affiliation of Indian Public Sector Banks on their technical efficiency using Data Envelopment Analysis technique. The empirical results revealed that the Operational Technical Efficiency in the Indian banking system stood at 88.5% which means the PSBs are wasting their inputs on an average by 11.5%. Much of the inefficiency is observed flowing out of their poor input utilization followed by failure to operate at the most productive scale size. It is also found that the banks of State Bank of India group have outperformed the other PSBs. Interestingly, the authors have attributed this difference to statistically significant differences in the managerial efficiency rather than scale efficiency. It is also observed that small banks are more technically efficient than large banks. Indeed, they conclude their study stating that size does not matter in explaining the technical efficiency of Indian PSB.

The next paper of the issue, "Fee-Based Activities and Technical Efficiency: An Assurance Region Model of Indian Commercial Banks", by Ram Pratap Sinha and Biswajit Chatterjee presents the findings of an empirical study carried out to compare the technical efficiency of 38 Indian commercial banks based on their fee-based activities and off-balance sheet exposures using a non-radial approach to Data Envelopment Analysis. The authors have noticed scalar improvement in technical efficiency over the observed years, 2001-02 to 2004-05. They have also noticed significant differences in the mean technical efficiency across ownership categories.

Authors N Kamakodi and M Basheer Ahmed Khan of the next paper, "Customer Expectations and Service Level in E-Banking Era: An Empirical Study", have studied as to how computerization has influenced the banking habits and preferences of customers by carrying out a survey using a structured questionnaire. The study revealed that the banks have by and large exceeded the expectations of customers in delivering technology-based services. However, the perceived service level from the branches is not up to the expected levels of the customer-respondents. The study also revealed that factors such as safety of funds, secured ATMs, ATMs' availability, reputation of the bank, personal attention, pleasing manners of the staff, confidentiality, banks' proximity to one's work places, timely service and friendly staff willing to help are the most influencing factors for the customers in choosing a bank. The study, however, suffers from a weakness: The sample size is small and it confines to a small area because of which the findings can at best be of an indicative nature.

Authors Wai-Ching Poon and Booi-Chen Tan of the last paper of the issue, "Spread of E-Banking in Malaysia: A Consumer Perspective", examine the factors affecting the growth of e-banking from the consumers' perspective by undertaking a survey using a Likert Scale questioner. They have found that Internet accessibility, awareness, cost, trust in banks, security concerns, reluctance of customers to switch to Net-banking are some of the critical factors that have influenced the adoption of e-banking services by the Malaysians. This study also suffers from a similar weakness pointed out in the previous article. But these two throw open a bigger research opportunity for the future.

- GRK Murty
Consulting Editor