Financial Risk and Governance Nexus in Nepalese Cooperative Societies

Abstract

This study aims to investigate the relationships between credit default risk, leverage risk, liquidity risk, and investment risk and their connection to the governance system of Nepalese cooperative societies. The research hypothesis tries to explore that these financial risks are not significantly associated with the governance system of cooperatives. The findings reveal a significant connection between the governance system of cooperatives and credit default risk, leverage risk, and investment risk. However, liquidity risk does not demonstrate a substantial link with the governance system, suggesting the influence of additional factors. These results underscore the pivotal role of effective governance in mitigating financial risks within cooperative societies. Interestingly, the lack of a significant connection between liquidity risk and the governance system implies that other factors are at play in influencing liquidity risk. These insights provide valuable guidance for policymakers and cooperative management, facilitating the enhancement of governance and risk management strategies, and ultimately contributing to the sustainability of cooperative societies in Nepal. The evaluation involves a comprehensive analysis of financial risks and the governance system in Nepalese cooperative societies, utilizing data from a sample of 126 cooperative societies in Kathmandu.