Does corporate governance characteristics influence firm performance in India? Empirical evidence using dynamic panel data analysis

Aswini Mishra, Shikhar Jain () and R. L. Manogna ()
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Shikhar Jain: BITS Pilani
R. L. Manogna: BITS Pilani
Authors registered in the RePEc Author Service: Leshma Manogna Ramappagari

International Journal of Disclosure and Governance, 2021, vol. 18, issue 1, No 6, 82 pages

Abstract: Abstract This study tries to examine the empirical relationship between corporate governance and financial performance of Indian firms by developing a corporate governance index (CGI) based on a variety of corporate governance characteristics. Such characteristics include board structure, ownership structure, director participation and busyness, market for external control, and product market competition. We employ a panel dataset for Indian non-financial firms listed on the National Stock Exchange for the period 2010–2018. Using a System GMM dynamic panel approach, we analyse the relationship of CGI with different firm performance measures including market-based performance measures like Tobin’s Q (TQ), and accounting-based performance measures like Return on Assets (ROA) and Return on Net Worth (RONW). Based on the empirical results, we find a significant positive relationship of corporate governance index (CGI) with ROA and RONW and significant negative relationship with TQ. Lastly, the CGI used by our study is based on a broad spectrum of dimensions of corporate governance and serves as a direction for business houses and shareholders to work towards governance practices leading to better financial performance of the firms.

Keywords: Corporate governance index; Board characteristics; Firm performance; Ownership structure; India (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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DOI: 10.1057/s41310-020-00098-7

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