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Effect of board characteristics on firm value: evidence from India

Rakesh Kumar Mishra (Department of Finance, Indian Institute of Foreign Trade, New Delhi, India)
Sheeba Kapil (Department of Finance, Indian Institute of Foreign Trade, New Delhi, India)

South Asian Journal of Business Studies

ISSN: 2398-628X

Article publication date: 5 March 2018




The purpose of this paper is to explore the relationship of board characteristics and firm performance for Indian companies.


Corporate governance structures of 391 Indian companies out of CNX 500 companies listed on National Stock Exchange have been studied for their impact on performance of companies. Structural equation modeling methodology has been employed on data for five financial years from 2010 to 2014 for selected companies. Market-based measure (Tobin’s Q) and accounting-based measure (return on asset) have been employed for measuring firm performance.


Empirical findings indicate that there is significant positive association between board size and firm performance. Board independence is found significantly related to firm performance. Number of board meetings is found to be sending positive signal to the market creating firm value. Separation of CEO and chairman of the board is found to be value creating and overburdened directors affect firm performance adversely. Findings also suggest that the governance-performance relationship is also dependent upon the type of performance measures used in the study.

Research limitations/implications

Limitations of this study are in terms of data methodology and possible omission of some variables. It is understood that the qualitative dynamics happening inside board meetings impact corporate performance. The strategic decisions-making process adopted by the boards to fight competition or to increase market share is not available in public domain easily. The decision-making processes and monitoring for implementation of these decisions could impact corporate governance-performance relationship. These parameters and their impact on corporate performance are not covered under the scope of the present study. However, the same could have thrown more light on governance-performance relationship.


The paper adds to the emerging body of literature on corporate governance-performance relationship in the Indian context using a reasonably wider and newer data set.



Mishra, R.K. and Kapil, S. (2018), "Effect of board characteristics on firm value: evidence from India", South Asian Journal of Business Studies, Vol. 7 No. 1, pp. 41-72.



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