Oct'20
The IUP Journal of Corporate Governance
Focus
imperatives without affecting the firm's performance in various regulatory settings proposed by the authorities concerned.
In the first paper, "Determinants of Board Characteristics: Evidence from India", the authors, Hitesh Shukla and Nailesh Limbasiya, have examined for the influence of net financial performance, market performance and operational performance measures on the board characteristics of Indian firms and held it to be positive. The relationship between the proposed variables under financial performance is drawn from existing literature. To achieve the research objective, fixed effect panel regression model is employed to estimate the statistical impact of firm performance on board characteristics. Based on the results, the authors have recommended scientific selection of board size, board composition and frequency of board meetings to help the organization improve its financial performance.
In the second paper, "Board Size and Earnings Quality in Government-Linked and
Non-Linked Quoted Firms in Nigeria", the authors, Ademola Adeniran Adewumi, Amos Olatunbosun Talabi and Godwin Gabriel Omula, have investigated the impact of board size and earnings quality. The study incorporates Resource-Based View (RBV) theory on the premise of corporate governance as a resource for the firm that has potential contribution for organizational outcomes such as earning quality. The authors have considered government-linked and non-linked firms listed on the Nigerian Stock Exchange. Earnings quality is captured from Discretionary Accruals (DACC), Earnings Predictability (EPRED) and Earnings Persistence (EPSIS). The study employs longitudinal research design covering the time period 2009 to 2018. The study reports that size of the board negatively affected earning management among firms listed on the Nairobi Securities Exchange.
In the third paper, "The Implications of CSR Spending on Firm's Performance: A Study of Section 135 of the Indian Companies Act, 2013", the authors, Perumalraja R, Natarajan P,
Azhaguraja N and Thiyagarajan S, have empirically tested the compliance level of the Indian corporates, in line with the mandate of Indian Companies Act 2013 under Section 135. Random effect model of panel regression has been opted for the study. From the analysis, it is understood that the amount spent on CSR activities in the previous year has an impact on the current year's net profit of both NSE and BSE listed firms. It was noted that the unspent amount on CSR activities by NSE and BSE listed companies continued to decline, signaling a positive sign for the society.
Consulting Editor
Determinants of Board Characteristics: Evidence from India
The present study examines the influence of firm performance, such as net financial performance, market performance and operational performance measures, on the board characteristics of Indian firms. The study draws on data from 61 firms listed on the BSE 100 index from 2010 to 2019. For estimation, the study uses a range of alternative measures of board characteristics such as board size, board composition and frequency of board meetings. It utilizes a wide spectrum of firm performance indicators such as net profit margin, adjusted Tobin's Q, return on capital employed, sales and asset turnover ratio. The fixed effect panel regression model is used to estimate the statistical impact of firm performance on board characteristics. In line with prior research, the present study reports incidence of significant influence of market performance on board size and its composition. The results confirm the importance of sales and operational performance in determining board size, board composition and frequency of board meetings. The study also establishes a base that managers and policymakers can use to choose optimum board characteristics. These findings are limited as the study primarily focused on large-cap firms. Further investigation can be undertaken to explore the impact of firm performance on board size for small and medium size firms.
Board Size and Earnings Quality in Government- Linked and Non-Linked Quoted Firms in Nigeria
he aim of the study is to examine the effect of board size on earnings quality in government-linked and non-linked firms quoted on the Nigerian Stock Exchange. Discretionary Accruals (DACC), Earnings Predictability (EPRED) and Earnings Persistence (EPSIS) are used as measures for earnings quality. The study employed a sample size of 30 companies consisting of 15 firms linked to government, i.e., where state ownership exists and is listed on the NSE and then firms without government linkage. Longitudinal research design was employed for the study with data covering the period 2009-2018. Secondary data was employed for the analysis and panel regression technique was employed for model estimation. The findings of the study reveal that the effect of board size on earnings quality shows differences amongst linked and non-linked firms. For government non-linked firms, board size effect is only significant in DACC, but neutral in relation to EPRED and EPSIS, while for government-linked firms, lower board size is found to enhance EPRED, but neutral in the case of DACC and EPSIS. Based on the findings, the study recommends that for both government-linked and non-linked firms, there is a need to ensure optimal board size. Though there is currently no consensus on what an adequate board size should be, the study recommends that companies must ensure that the board represents all the stakeholders' interest as this can help to improve effectiveness.
The Implications of CSR Spending on Firm's Performance: A Study of Section 135 of the Indian Companies Act, 2013
Today's corporate world has realized the importance of spending a share of profit towards societal well-being and environmental protection. In line with that realization, the Indian Companies Act 2013 under Section 135 made that spending mandatory. This paper empirically tested the compliance level of Indian corporates in terms of allocation of firms' earnings and the extent of utilization of the same towards Corporate Social Responsibility (CSR) activities. Companies have started accounting for the unspent amount every year. Besides, analysis and results of this paper reveal that there is a positive relationship between CSR spending and firm's profit. It was witnessed empirically by analyzing four years' data of Nifty 50 and BSE 30 companies. Panel regression and Gaussian Mixture models were used and tested. It is found that both the NSE and BSE listed companies' previous year CSR spending had a positive impact on the current year's profits.
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