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.
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Data availability statement
The data that support the findings of this study are available from CMIE Prowess (https://prowessdx.cmie.com/), a database of the financial performance of companies. Restrictions apply to the availability of these data, which were used under licence for this study.
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Mishra, A.K., Jain, S. & Manogna, R.L. Does corporate governance characteristics influence firm performance in India? Empirical evidence using dynamic panel data analysis. Int J Discl Gov 18, 71–82 (2021). https://doi.org/10.1057/s41310-020-00098-7
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DOI: https://doi.org/10.1057/s41310-020-00098-7