Does corporate governance influence firm performance? Evidence from India

Abstract

Corporate Governance (CG) in India has undergone major transformation in the recent past with the enactment of Companies Act, 2013 and revision of SEBI's Listing Agreement. Though some studies were undertaken in the Indian context few conventional aspects of CG have been repetitively addressed with conflicting results. The aim of this study is to examine the impact of some prominent CG attributes such as board size, board independence, role duality, board's gender diversity, ownership concentration and audit committee independence on both market as well as accounting based measures of firm performance (FP). To this end the study uses a sample of top 100 non-financial and non-utility firms listed on the Bombay Stock Exchange (BSE) for the period of 2014-2018 and employs two stage least square with instrumental variables technique of estimation which takes into account potential endogeneity in CG-FP relationship. The findings reveal a significant positive impact of board size, ownership concentration and audit committee independence on market based measure of FP while board independence is found to have a significant negative impact on accounting based measure of FP. Moreover role duality and gender diversity are not associated with FP. The outcome of this study highlights how the relationship between CG and FP works in the unique institutional setting of India and it should be of interest to regulators, practitioners and other market participants.

Board Structure and Firm Performance: Evidence from State Owned Enterprises in Kenya

“…This results are justified in the Agency theoretical framework that predicts that larger board are effective in monitoring management resulting to improved performance. This finding also in agreement with other previous studies (Saha & Kabra, 2019;Kalsie & Shrivastav, 2016;Fauzi & Locke, 2012. The results on the effect of board independence on firm performance established negative and significant effect on firm performance. This finding is not in consistent with agency theory perspective that predicts that independent boards will lead to improved monitoring function resulting to improved performance (Khan, Al-Jabri & Saif, 2019;Rashid, 2018).…”

“…Independent directors maybe lacking information about the entity operations hence thus making minimal contribution towards performance improvement. The findings are in agreement with other previous studies that established that the higher proportion of independent directors negatively related to firm performance (Saha & Kabra, 2019;Nath, Islam & Saha ,2015;Malik &2012).…”

“…The findings from both developed and developing economies were mixed and inconclusive. Based on previous studies board Size was operationalized as the total numbers of board membership (Saha & Kabra, 2019;Oba, Tigrel, & Sener, 2014).…”

“…However empirical evidence on the relationship is inconclusive. Based on previous studies board independence was measured as percentage of non-executive directors in the board (Saha & Kabra ,2019;Nath, Islam & Saha, 2015).…”

Analisis Pengaruh Tata Kelola Perusahaan Dan Struktur Modal Terhadap Kinerja Perusahaan

“…Hubungan positif antara kedua variabel juga ditemukan dalam hasil penelitian Pucheta-Martínez & Gallego-Álvarez (2020) serta Saha & Kabra (2015). Keberadaan direktur wanita juga memiliki beberapa keunggulan dibandingkan dengan laki-laki.…”