Board structure and firm performance : evidence from India's top 500 companies

The objective of this paper is to investigate the relationship between internal governance structures in Indian companies and financial performance. The
study includes an examination of aspects of the effectiveness of boards of directors', including composition of the board, board size and aspects of board leadership including duality and board busyness.

Leviathan resists : the endogenous relationship between privatization and firm performance

Using a panel dataset of privatized cement firms in Turkey, this paper models and finds support for the simultaneous relationship between privatization and firm performance. It is found that favorable short-run performance, weak market potential, higher employment, lower socio-economic development, concentrated voter preferences, and weaker representation of right-wing parties in the firms’ locality delay the timing of privatization. The paper also finds that privatization increases output in the medium-term by reducing the labor stock and promoting the adoption of more advanced technology, such that production shifts from constant to decreasing returns to scale.

Board structure and firm performance : evidence from India's top companies

Manuscript Type: Empirical

Research Question/Issue: This paper investigates the relationship between internal governance structures and financial performance of Indian companies. The effectiveness of boards of directors, including board composition, board size, and aspects of board leadership including duality and board busyness are addressed in the Indian context using two theories of corporate governance: agency theory and resource dependency theory.

Research Findings/Insights: The study used a sample of top Indian companies taking into account the endogeneity of the relationships among corporate governance, corporate performance, and corporate capital structure. The study provides some support for aspects of agency theory as a greater proportion of outside directors on boards were associated with improved firm performance. The notion of separating leadership roles in a manner consistent with agency theory was not supported. For instance, the notion that powerful CEOs (duality role, CEO being the promoter, and CEO being the only board manager) have a detrimental effect on performance was not supported. There was some support for resource dependency theory. The findings suggest that larger board size has a positive impact on performance thus supporting the view that greater exposure to the external environment improves access to various resources and thus positively impacts on performance. The study however failed to support the resource dependency theory in terms of the association between frequency of board meetings and performance. Similarly the results showed that outside directors with multiple appointments appeared to have a negative effect on performance, suggesting that "busyness" did not add value in terms of networks and enhancement of resource accessibility.

Theoretical/Academic Implications: The two theories of corporate governance, namely agency and resource dependence theory, were each only partially supported, by the findings of this study. The findings add further to the view that no single theory explains the nexus between corporate governance and performance.

Practitioner/Policy Implications: This study demonstrates that corporate governance measures utilized in developed economies related to boards of directors have some synergies and relevance to emerging economies, such as India. However, the nature of business structures in India, for example the large number of family businesses, may limit the generalizability of the findings and signals the need for further investigation of these businesses. The evidence related to multiple appointments of directors suggests that there may be support for restricting the number of directorships held by any one individual in emerging economies, given that the "busyness" of directors was negatively associated with firm performance.

On institutional ownership and firm performance : a disaggregated view

We study the relationship between institutional ownership and firm performance in Finland. A systems approach is employed to investigate the potential two-way causality between firm performance and ownership structure. Three-stage least squares estimation technique is used to solve for the systems. The evidence suggests an endogeneity problem between firm performance and institutional ownership. However, the magnitude of the problem differs with respect to the concentration of ownership measure used. Our results show that a more equal distribution of the voting power among the largest institutional stakeholder may exert positive effects on firm performance. We also find a significant difference relating to firm performances and equity ownerships between the two classes of institutional investor. Consistent with the ownership structure in Finland, we find that a simple ownership concentration index does not influence firm performance.

Corporate governance structure and firm performance : empirical evidence from Brusa Malaysia, Kuala Lumper

The issue of corporate governance has been emerging as important phenomena that has been searched extensively both in developed countries due to its strategic impact on the monitoring of management activities and firms’ performance. Yet little attempt has been made in developing countries like Malaysia to ascertain what constitute corporate governance and its impact on firm's performance. Therefore, this study aims at examining the structure of the corporate governance and its impact on firm’s performance. This study is based on 100 firms, which are the component of the Composite Index (CI) serve as market barometer. This study employs cross-sectional annual multiple regression model to examine, what constitutes the corporate governance structure and its impact on performance of the firm. The analysis was based on annual regression over 5 years period from 1997 through 2001. Three different blend of surrogate for corporate governance were developed for good corporate governance structure. These are the independent non-executive (outside) directors, audit committee and remuneration committee. To isolate the size effect from the impact of corporate governance structure on firm’s performance, firm’s size was also included are variable in the model. The ratio of net income before tax to total asset is used as a surrogate for firm’s performance. Evidence from the study indicates that there is partial relation between corporate governance structure and corporate performance. The presence of both audit and remuneration committee serves as an important monitoring device to control management activities that lead to increase firm's performance. While on average, the presence of independent nonexecutive directors does not provide any significant explanation for the firm's performance. However, the firm size appears to have significant impact on corporate performance.

Contracting-agency analysis of the association between firm risk, investment opportunity set, corporate governance and firm performance

Tests the efficiency of corporate controls (board monitoring and incentive contracts) for growth or risk firms. By exploring the implications of controls and studying their interactive effects on firm performance, this study demonstrates how and why different firms use corporate governance controls to align managers' and shareholders' interests.