Governing Structure of Banks and its Relationship with Employee Cost, Productivity & Profitability An Analysis of Indian Banking Sector

Governing Structure of Banks and its Relationship with Employee Cost, Productivity & Profitability An Analysis of Indian Banking Sector

SUBHAJIT GUPTA

Abstract

Out of all the inputs required to build up a profitable enterprise, one of the essential elements, if not the most crucial element, is human resources. They are the ones who ultimately drive the business goals, and this is true for the banking sector, but very few studies have been done to try and gauge the impact of the human resource element on the profitability of the enterprise. This study is an attempt to try and address this gap, especially in the Banking sector.  This paper has twin objectives to identify any relationship between banks' profitability in India with employee cost & employee productivity. It also tries to answer the question as to whether there is any difference in employee cost & productivity depending on the governing structure of the banks where governing system means the entity holding majority stake based on which banks could be either public sector, private sector, or foreign banks. This paper uses the fixed effects panel data analysis and ANOVA testing and concludes that there is a significant relationship between profitability & employee cost and employee productivity. The second conclusion is that there is a significant difference in employee cost, employee productivity & profitability based on governing structure. This study uses three variables: profit per employee, return on assets, and Employee cost to total cost ratio. A    significant drawback is that many other variables can impact profitability, which has not been included in this study.

Keywords: Banking, governing structure, Profitability Productivity relation, employee cost, employee productivity, productivity cost relationship

JEL CODES : M1,M5,G2