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.

Board structure and firm performance : evidence from an emerging economy

We investigate the relationship between corporate board structure and firm performance of Bangladeshi companies. Using a sample of 654 firm- year observations for the period 2005-2009, the results show some support for aspects of agency theory as a greater proportion of independent directors on boards is related to better firm performance. Supporting resource dependence theory our result also suggest that larger boards provide valuable business experience, expertise, skill and social and professional networks which might add substantial business resources to the firms and thus positively impact on performance. We also find that female and foreign directors in Bangladesh provide more monitoring which leads to better firm performance. Our study contributes to extant research on board structure–performance relationship by providing evidence from an emerging economy context which is characterised by ownership concentration, family dominance and poor regulatory oversight.

Maternal creatine supplementation during pregnancy prevents long-term changes in diaphragm muscle structure and function after birth asphyxia

Using a model of birth asphyxia, we previously reported significant structural and functional deficits in the diaphragm muscle in spiny mice, deficits that are prevented by supplementing the maternal diet with 5% creatine from mid-pregnancy. The long-term effects of this exposure are unknown. Pregnant spiny mice were fed control or 5% creatine-supplemented diet for the second half of pregnancy, and fetuses were delivered by caesarean section with or without 7.5 min of in-utero asphyxia. Surviving pups were raised by a cross-foster dam until 33±2 days of age when they were euthanized to obtain the diaphragm muscle for ex-vivo study of twitch tension and muscle fatigue, and for structural and enzymatic analyses. Functional analysis of the diaphragm revealed no differences in single twitch contractile parameters between any groups. However, muscle fatigue, induced by stimulation of diaphragm strips with a train of pulses (330 ms train/sec, 40 Hz) for 300 sec, was significantly greater for asphyxia pups compared with controls (p<0.05), and this did not occur in diaphragms of creatine + asphyxia pups. Birth asphyxia resulted in a significant increase in the proportion of glycolytic, fast-twitch fibres and a reduction in oxidative capacity of Type I and IIb fibres in male offspring, as well as reduced cross-sectional area of all muscle fibre types (Type I, IIa, IIb/d) in both males and females at 33 days of age. None of these changes were observed in creatine + asphyxia animals. Thus, the changes in diaphragm fatigue and structure induced by birth asphyxia persist long-term but are prevented by maternal creatine supplementation.