The IUP Journal of Corporate Governance
Determinants of Board Characteristics: Evidence from India

Article Details
Pub. Date : Oct, 2020
Product Name : The IUP Journal of Corporate Governance
Product Type : Article
Product Code : IJCG11020
Author Name Hitesh Shukla and Nailesh Limbasiya
Availability : YES
Subject/Domain : Management
Download Format : PDF Format
No. of Pages : 25



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.


Over the last two decades, corporate governance has gained importance in both the developed and developing economies. In India, corporate governance has been redefined by major trends such as globalization, privatization and liberalization policies. The government, researchers, corporate executives and policymakers have all emphasized the importance of good governance practices for sustainable growth. Good governance encourages transparency and integrity between the management and the owners of the firm to avoid agency problems (Shleifer and Vishny, 1997; and Dalton et al., 1998).

The relationship between firm performance and its board characteristics has received much attention from academicians and industry associates. The ambitious nature of the managers tends to influence board characteristics such as board size, board composition, and frequency

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