Impact of Ownership Structure and Board Characteristics on Firm Value: Evidence From China and India

Abstract

Corporate governance plays a decisive role in the financial performance of a firm. While the majority of the firms in China and India are owned and managed by its promoters, the present study attempts to examine the impact of ownership structure and board characteristics on firm value for these two economies. The study employs panel data methodology with industry and time fixed effects on a sample of 1,042 firms listed in National Stock Exchange of India and 450 firms listed in Shanghai Stock Exchange of China. The study finds promoter ownerships to positively impact a firm’s value creation process, while institutional investors exert a negative influence. Although CEO duality enhances firm value in China, the results show otherwise for Indian firms. Additionally, while board independence is positively correlated to firm value in India, it has a negative effect on firms in China. Finally, the study finds that larger board size contributes favorably toward better decision making.

Citation

Varghese, G. and Sasidharan, A. (2020), "Impact of Ownership Structure and Board Characteristics on Firm Value: Evidence From China and India", Biswas, R. and Michaelides, M. (Ed.) Financial Issues in Emerging Economies: Special Issue Including Selected Papers from II International Conference on Economics and Finance, 2019, Bengaluru, India (Research in Finance, Vol. 36), Emerald Publishing Limited, Leeds, pp. 217-234. https://doi.org/10.1108/S0196-382120200000036012