The IUP Journal of Corporate Governance
Board Structure, Board Diversity and Corporate Governance: Evidence from Listed Indian Companies
Article Details
| Pub. Date | : Jan, 2020 |
|---|---|
| Product Name | : The IUP Journal of Corporate Governance |
| Product Type | : Article |
| Product Code | : IJCG20120 |
| Author Name | :Sunaina Kanojia, Jai Prakash Sharma, Shweta Jain |
| Availability | : YES |
| Subject/Domain | : Management |
| Download Format | : PDF Format |
| No. of Pages | : 27 |
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Abstract
Board structure and board diversity being a critical element in the context of corporate governance has been expounded in the paper with evidence emerging from the index constructed for large listed Indian companies and the latter's impact on the financial performance measured in terms of Tobin's Q. Further, Ordinary Least Square (OLS) Regression analysis has been done by considering board composition, board size, board meetings, CEO duality and CEO busyness with financial performance parameters. The evidence collated from the empirical tests indicates positive association between board structure index and financial performance. This suggests that well-governed companies having well-structured boards are highly valued and their financial statements exhibit better performance over the long term. Also, there is a positive relationship among board diversity index and board size and corporate financial performance. However, a negative association has been observed between number of board meetings and firm's financial performance measures, indicating that investors immediately need a corporate governance index for listed companies, which highlights the corporate governance parameters leading to buying, holding and selling decisions of investment.
Description
The interest in corporate governance has grown in the past few years, especially with the collapse of a series of high profile corporates (e.g., Enron, HIH, One.Tel, HarrisScarfe, WorldCom, Satyam computers) in the US, Australia and India. The issue of board structure as a corporate governance mechanism has received considerable attention in the past few years from academics, regulators and market participants as the theory provides conflicting views regarding the impact of board structure on the performance of firms. Till date, the association between board structure and performance of the company has been the most studied topic among all board investigations (Bhagat and Black, 1999). It is often assumed that the financial performance of a company is mainly determined by its board characteristics.
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