BOARD CHARACTERISTICS, CORPORATE GOVERNANCE AND AGENCY PROBLEMS IN INDIAN COMPANIES

Abstract

This research paper explores how the board characteristics and other external governance mechanisms mitigate the agency conflicts prevailing in the Indian corporate sector based on panel data of 315 companies drawn from the BSE 500 index (Bombay Stock Exchange) during the period 2008-2018. Utilising the panel OLS regression methodology, this research paper has derived two alternative econometric models based on the proxies of agency cost (operating ratio and Tobin's Q) as dependent variables and the independent variables as the board size, independent directors, CEO-Chairperson separation, audit committee, nomination, and remuneration committee, stakeholders' relationship committee, promoters' holdings, leverage, bank debt, and firm size. The descriptive statistics establish that the Indian companies are subjected to severe agency problems. The multivariate regression results reveal that the board characteristics as governance mechanisms are not successful in mitigating agency conflict in Indian companies. However, Indian companies have been gradually assimilating corporate governance mechanisms.