A Corporate governance index for large listed companies in India

Jayati Sarkar (), Subrata Sarkar () and Kaustav Sen ()
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Jayati Sarkar: Indira Gandhi Institute of Development Research
Kaustav Sen: Indian Institute of Management

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: We construct a Corporate Governance Index for 500 large listed Indian firms for the period from 2003 to 2008 in this paper. The index construction uses information on four important corporate governance mechanisms: the board of directors, the ownership structure, the audit committee, and the external auditor. The construction of the index for six years allows an examination of the evolution of corporate governance in India in a period when there have been a large number of corporate governance reforms. The analysis documents a rising trend in the level of the Corporate Governance Index of Indian companies. There is a strong association between the Corporate Governance Index and the market performance of companies, where companies with better corporate governance structures earn substantially higher rates of return in the market. This analysis shows that Indian markets tend to reward companies that carry out governance reforms. It provides an impetus to regulators as well as to push for further reforms.

Keywords: Corporate Governance Index; board of directors; ownership structure; audit committee; external auditors (search for similar items in EconPapers)
JEL-codes: C43 G18 G34 M41 M42 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012-03
New Economics Papers: this item is included in nep-acc and nep-cse
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2012-009

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