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Mishra, Supriti; Mohanty, Pitabas

Corporate governance as a value driver for firm performance: evidence from India

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  • Media type: E-Article
  • Title: Corporate governance as a value driver for firm performance: evidence from India
  • Contributor: Mishra, Supriti; Mohanty, Pitabas
  • Published: Emerald, 2014
  • Published in: Corporate Governance, 14 (2014) 2, Seite 265-280
  • Language: English
  • DOI: 10.1108/cg-12-2012-0089
  • ISSN: 1472-0701
  • Origination:
  • Footnote:
  • Description: <jats:sec><jats:title content-type="abstract-heading">Purpose</jats:title><jats:p>–<jats:italic>The study aims to examine corporate governance issues in India and establish the relationship between corporate governance and financial performance.</jats:italic></jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Design/methodology/approach</jats:title><jats:p>–<jats:italic>The sample comprises 141 companies belonging to the “A” group stocks listed in the Mumbai Stock Exchange of India. Considering the institutional uniqueness in India, a composite measure of corporate governance is developed comprising three indicators – legal, board and proactive indicators. Data on the three indicators and financial performance were procured from secondary sources. In the step-wise multiple regression analysis, the influence of these three indicators and the composite measure of corporate governance was examined on firm performance after controlling the confounding effects of firm size.</jats:italic></jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Findings</jats:title><jats:p>–<jats:italic>The board and the proactive indicators influence the firm performance significantly whereas legal compliance indicator does not do so. The composite corporate governance measure is a good predictor of firm performance.</jats:italic></jats:p></jats:sec><jats:sec><jats:title content-type="abstract-heading">Originality/value</jats:title><jats:p>–<jats:italic>This study has two contributions: one, it proposes a composite measure of corporate governance considering the unique institutional characteristics of the Indian economy. Two, the study establishes the predictability of the new measure of corporate governance on firm performance as a tool to boost investors' confidence and financial health of firms.</jats:italic></jats:p></jats:sec>