Corporate governance, firm risk and firm performance: the moderating role of group affiliation

Abstract

Purpose

The purpose of this study is to determine the moderating effect of group affiliation (GA) while examining the relationship of corporate governance (CG) with firm performance (FP) and firm risk-taking (FRT).

Design/methodology/approach

The study employed a sample of 100 non-financial firms, selected randomly from the top 500 companies listed on the Bombay Stock Exchange (BSE) based on their market capitalisation for 2013–2022. The random effects and fixed effect models are employed for the analysis. Furthermore, the generalised estimating equations (GEE) population-averaged model is used for added robustness.

Findings

The results reveal that while strong CG improves FP, GA modifies the effect of CG on FP. Both GA and CG have beneficial effects, but their synergy is insignificant. However, in the context of CG and FRT, the study unveils that a strong CG is associated with a reduction in FRT, and this relationship is more pronounced for standalone firms.

Originality/value

To the best of the authors' knowledge, the present study is a maiden attempt to investigate the moderating effect of GA while examining the relationship of CG with FP and FRT.

Citation

Jha, R.K., Kalita, N. and Tiwari, R.K. (2024), "Corporate governance, firm risk and firm performance: the moderating role of group affiliation", Asian Review of Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/ARA-04-2024-0106