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Non-linear relationship of board size and board independence with firm performance – evidence from India
Journal of Indian Business Research Pub Date : 2021-08-16 , DOI: 10.1108/jibr-06-2020-0180
Srikanth Potharla 1 , Balachandram Amirishetty 2
Affiliation  

Purpose

This study aims to examine the significance of the non-linear relationship of board size and board independence on the financial performance of listed non-financial firms in India.

Design/methodology/approach

The study draws the sample of the listed non-financial firm in the Indian market from the year 2011–2018 and applied panel least squares regression with and without industry fixed effects on the model with quadratic equation. Quantile regression is also used to test the robustness of the results. The financial performance is measured through one accounting measure (i.e. return on assets [ROA]) and one market-based measure (i.e. Tobin’s Q). The empirical model also controls firm-specific variables which are expected to have an impact on financial performance.

Findings

The study found that the relationship of board size and board independence with the financial performance of a firm is in a non-linear inverted U-shape. The results are qualitatively similar for both ROA and Tobin’s Q after controlling industry fixed effects.

Originality/value

This is the first study in India which tests the non-linear relationship of board size and board independence with the financial performance of the firm. The study contributes to the limited literature on the implications of board characteristics on the performance of the firms in India.



中文翻译:

董事会规模和董事会独立性与公司业绩的非线性关系——来自印度的证据

目的

本研究旨在检验董事会规模和董事会独立性的非线性关系对印度非金融上市公司财务业绩的重要性。

设计/方法/方法

该研究抽取了2011-2018年印度市场上市非金融企业的样本,并在二次方程模型上应用了面板最小二乘回归,有无行业固定效应。分位数回归也用于测试结果的稳健性。财务业绩是通过一种会计指标(即资产回报率 [ROA])和一种基于市场的指标(即托宾 Q)来衡量的。经验模型还控制预期会对财务业绩产生影响的特定于公司的变量。

发现

研究发现,董事会规模和董事会独立性与企业财务绩效的关系呈非线性倒U型。控制行业固定效应后,ROA 和 Tobin's Q 的结果在性质上相似。

原创性/价值

这是印度第一项测试董事会规模和董事会独立性与公司财务业绩的非线性关系的研究。该研究有助于关于董事会特征对印度公司业绩影响的有限文献。

更新日期:2021-08-16
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