Corporate Governance, Regulatory Framework and Customer Loyalty in Nepalese Commercial Banks

Abstract

Background: Corporate governance and regulatory oversight have emerged as a crucial factor in strengthening transparency, accountability, and institutional credibility in the banking sector.  This is important for Nepalese commercial banks, where maintaining customer trust and long-term loyalty has become essential in an increasingly competitive and regulated financial environment. Therefore, this study examines the relationship between corporate governance and customer loyalty in Nepalese commercial banks with the moderating effect of regulatory oversight.

 Methods: The study is based on a quantitative research design and structured questionnaire and to examine the relationship between variables. The data were collected from 390 officer and managerial level employees working in different branches of Nepalese commercial banks located in Kathmandu valley. To examine the relationships among the variables and the moderating effects, the PROCESS Macro Model I was employed.

Results: The findings revealed that corporate governance significantly and positively affects customer loyalty. Similarly, the regulatory oversight also showed a significant positive influence on customer loyalty. Furthermore, the study confirmed that the regulatory framework significantly moderates this relationship (interaction β = 0.18, p = 0.011) strengthening the positive effect of corporate governance on customer loyalty.

Conclusion: Both corporate governance and regulatory oversight are important for enhancing customer loyalty in Nepalese commercial banks. Strengthening transparency, accountability, ethical practices, and regulatory compliance can improve institutional credibility and customer confidence. Therefore, commercial banks and regulatory authorities should adopt a comprehensive approach by strengthening governance systems in order to improve customer trust, institutional credibility, and long-term customer loyalty.

Novelty: This study contributes to the literature by integrating corporate governance, regulatory oversight, and customer loyalty within a single empirical framework in the Nepalese banking context. It further examines the moderating role of the regulatory oversight, which has received limited empirical attention in previous studies.