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Board characteristics and firm value for Indian companies

Board characteristics and firm value for Indian companies This paper aims to explore the relationship between board characteristics and firm performance for Indian companies.Design/methodology/approachCorporate governance structures of 391 Indian companies out of CNX 500 companies listed on National Stock Exchange have been studied for their impact on performance of companies. Panel data regression methodology has been used on data for five financial years from 2010 to 2014 for the selected companies. Performance measures considered are market-based measure (Tobin’s Q) and accounting-based measure (return on asset [ROA]).FindingsThe empirical findings indicate that the market-based measure (Tobin’s Q) is more impacted by corporate governance than the accounting-based measure (ROA). There is a significant positive association between board size and firm performance. Board independence is found significantly related to firm performance. Number of board meetings is found to be sending positive signal to the market creating firm value. Separation of chief executive officer and chairman of the board is found to be value-creating, and overburdened directors affect firm performance adversely.Research limitations/implicationsLimitations of the study are in terms of methodology and possible omission of some variables. It is understood that the qualitative dynamics happening inside board meetings impact corporate performance. The strategic decision-making process adopted by the boards to fight competition or to increase market share is not easily available in public domain. The decision-making processes and monitoring for implementation of those decisions could impact corporate governance performance relationship. These parameters and their impact on corporate performance are not covered under the scope of the present study.Originality/valueThe paper adds to the emerging body of literature on corporate governance performance relationship in the Indian context by using a reasonably wider and newer data set. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Indian Business Research Emerald Publishing

Board characteristics and firm value for Indian companies

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References (142)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1755-4195
DOI
10.1108/jibr-07-2016-0074
Publisher site
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Abstract

This paper aims to explore the relationship between board characteristics and firm performance for Indian companies.Design/methodology/approachCorporate governance structures of 391 Indian companies out of CNX 500 companies listed on National Stock Exchange have been studied for their impact on performance of companies. Panel data regression methodology has been used on data for five financial years from 2010 to 2014 for the selected companies. Performance measures considered are market-based measure (Tobin’s Q) and accounting-based measure (return on asset [ROA]).FindingsThe empirical findings indicate that the market-based measure (Tobin’s Q) is more impacted by corporate governance than the accounting-based measure (ROA). There is a significant positive association between board size and firm performance. Board independence is found significantly related to firm performance. Number of board meetings is found to be sending positive signal to the market creating firm value. Separation of chief executive officer and chairman of the board is found to be value-creating, and overburdened directors affect firm performance adversely.Research limitations/implicationsLimitations of the study are in terms of methodology and possible omission of some variables. It is understood that the qualitative dynamics happening inside board meetings impact corporate performance. The strategic decision-making process adopted by the boards to fight competition or to increase market share is not easily available in public domain. The decision-making processes and monitoring for implementation of those decisions could impact corporate governance performance relationship. These parameters and their impact on corporate performance are not covered under the scope of the present study.Originality/valueThe paper adds to the emerging body of literature on corporate governance performance relationship in the Indian context by using a reasonably wider and newer data set.

Journal

Journal of Indian Business Research – Emerald Publishing

Published: Feb 7, 2018

Keywords: India; Board structure; Corporate governance; Firm performance

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