The incomplete contract between the shareholder and manager results in the need for Corporate Governance (CG) mechanisms through which the shareholders ensure that the managers really work with the objective of creating wealth for them by getting good returns. Hence, a better CG mechanism ensures better firm performance. But the researchers always question the effectiveness of CG practices in improving the efficiency of the utilization of shareholders funds, and thereby, increasing the performance of the firm. The first two papers of this issue, focus on the relationship between CG and firm performance.

In the first paper, "Corporate Governance Disclosure and Company Performance of Hong Kong-Based and China-Based Family-Controlled Property Development Companies", Steve C C Fong and Winnie W Y Shek analyze the relationship between CG disclosure and firm performance of the Hong Kong Stock Exchange listed firms. The authors choose the family-controlled property development companies for their analysis and classify them into two categories—the firms based in China and those based in Hong Kong. The authors develop an index to measure the mandatory and voluntary CG disclosure made by the sample firms and arrive at the scores for them. They use simple correlation analysis to understand the relationship between CG disclosures and firm performance. The results indicate that there is a positive relationship between CG disclosure and financial performance in Hong Kong-based companies, especially the operating profit margin and the net profit margin.

In the second paper, "Impact of Governance Instruments on the Productivity of Nigerian Listed Firms", Adeolu O Adewuyi and Afolabi Emmanuel Olowookere analyze the effect of CG mechanisms on the performance of Nigerian firms. Instead of using the conventional financial performance indicators, they measure the firm performance in terms of productivity. The CG measures that are considered include Board size, Directors' shareholding and ownership concentration among others. The results indicate that governance measures like, ownership concentration and debt-equity ratio are drivers of firms' productivity while the impact of other major governance mechanisms like, Board size, Board independence, and independent audit membership are insignificant on productivity.

As identified in the results of the second paper, ownership structure of the firm is one of the important parameters of the CG system of a firm. But in the third paper, "Ownership Structure in Greece: Impact of Corporate Governance", Themistokles Lazarides, Evaggelos Drimpetas and Koufopoulos Dimitrios suggest that ownership structure is more important than other CG parameters. They analyze ownership structure in Greece and its relationship with CG structure of the firms. The authors study the determinants of the ownership concentration, which include the CG parameters. The findings suggest that ownership structure of listed business entities in Greece is affected by the historical development of the firm, its organizational scheme and even more by the balance of power and control within the firm. CG mechanisms as well as external factors, like the law, index ranking, and existence of an external market for corporate control do not seem to have any significant effect on ownership structure.

Firms typically adopt better CG practices than what is prescribed as mandatory if they wish to attain competitiveness in the capital market. In the fourth paper, "Voluntary Corporate Governance Disclosure: A Study of Selected Companies in India", Reema Sharma and Fulbag Singh analyze the voluntary CG practices of the companies over and above the mandatory requirements as per clause 49 of the listing agreement. The sample includes 50 listed firms from four industries, viz., software, textiles, sugar and paper. The authors develop a voluntary CG disclosure index and arrive at the scores for sample firms. The results indicate that the sample firms disclose less than 50% of the items of voluntary CG disclosure index taken for the study. It is also observed that there is no significant difference among the disclosure scores of these four industries chosen for this study.

Typically, the CG practices of the business firms are aimed at protecting the shareholders who are the participants of the capital market. But the research indicates that CG practices are influenced by the product and labor market as well. In the fifth paper, "Product Market Competition and Corporate Governance", Seema Lall analyzes the relationship between product market competition and CG practices in the Indian firms. She considers three industries, which are highly competitive, namely, `fast moving consumer goods', healthcare and Information Technology and two lesser competitive industries namely infrastructure and metals with a sample of 10 firms in each industry. The CG parameter used in this paper is the board composition, which is measured with two parameters—Board size and Board independence. The results indicate that the highly competitive and lesser competitive industry firms indeed differ in the relationship between firm performance and board composition.

In the sixth paper, "Corporate Governance in India: The Case of HDFC Bank ", Kirti Ranjan Swain analyzes the Codes of CG in HDFC Bank, one of India's leading private sector banks. First, the study provides a detailed review of existing Codes of CG. Then the author analyzes the CG structures and practices in HDFC Bank. The author uses both primary and secondary data for analyzing the adaptability of good codes of CG in Indian context in HDFC Bank and concludes that though the bank's CG practices are satisfactory, it can be improved in many areas.

Corporate governance might be only about protecting the shareholders in Anglo-American context. But the European definition of CG includes the responsibility towards not just the shareholders but all the stakeholders, which includes the society also. In the last paper, "Do Corporates have Social Responsibility? A Case Study of TVS Motor Company", M Indira and Siddaraju V G describe the Corporate Social Responsibility (CSR) activities undertaken by TVS Motors Ltd., one of India's leading two wheeler manufacturing firms. Using the case study approach, the authors analyze the CSR objectives of the firm, their capability to identify social issues, implementation of strategies, and social relevance of the issues addressed by the company and the attitude of the decision makers in the firm towards CSR. The authors argue that the CSR initiatives of TVS are a good example of how a corporate can bring effective changes in the region where they operate.

-- S Subramanian
Consulting Editor