The IUP Journal of Corporate Governance
Does Corporate Governance Impact Firm Performance and Firm Risk? Empirical Evidence from India

Article Details
Pub. Date : Jan, 2022
Product Name : The IUP Journal of Corporate Governance
Product Type : Article
Product Code : IJCG40122
Author Name Harsh Raj Pathak, Vijaya Lakshmi S and Sonali Narbariya
Availability : YES
Subject/Domain : Management
Download Format : PDF Format
No. of Pages : 16



In the light of the growing importance of Corporate Governance (CG) in academic and industrial research, the present paper aims to answer the question: Does corporate governance impact Firm Performance and Firm Risk? Multivariate regression analysis was conducted on three models to answer the question, with firm performance and firm risk being the dependent variables. Different CG mechanisms (Board Composition, Board Size, Frequency of Meetings and Audit Committee) were considered as independent variables. The results of the regression analysis postulate that board composition, frequency of meetings and audit committee significantly impact the firm performance i.e., Return on Assets (ROA) and Profit Margin (PM). Board composition was also found to have a significant impact on firm risk where we used Beta as a proxy measure. Overall, the objective of the study was met, as all the three models showcase significant results. The present study provides important insights into fair CG practice, with scope for future research.


The association between firm performance and Corporate Governance (CG) has been extensively researched in the context of developed countries. However, over the recent years, this topic has also been discussed in the context of emerging economies such as India, in the light of the recent scams and large business collapses. These corporate collapses are a result of a weak system of CG. Recent literature highlights the need for improving and reforming the governance structure in fast growing economies like India. The governance of a firm plays a key role in preventing accounting frauds. Berkman et al. (2009) found that firms which have a weak governance structure are more prone to accounting frauds. Over the years, Indian enterprises have encountered many scandals. From 2009 to 2019, the country witnessed largescale scams. This has raised questions and red flags on the CG practices in India. A number of studies have