Corporate Governance Rating and its Impact on Firm Level Performance and Valuation

Abstract

Purpose This paper examines the firm specific characteristics that drive companies in India to superior governance and sustainability performance and reporting as proxied by their presence in the S&P ESG India index. It further seeks to investigate whether the corporate financial performance is impacted by corporate governance & sustainability performance and reporting. Design/methodology/approach This study proposes to use the rating of companies by the S&P ESG India index and company related performance data as available from Prowess (CMIE). The analysis will require the use of Pearson’s correlations and regression analysis model to understand whether Indian investors value governance and sustainability reporting. Findings These findings have important implications not only for the investors, the corporations, and the managers but also for regulatory authorities, governments and various bodies around the world which are trying to create awareness about better governance and sustainability, particularly in emerging economies like India. Research limitations/implications The sample size of firms taken could have been more to include firms across all sectors. A cross country analysis would have helped us to understand whether similar results emerge in their context. Practical implications In Indian context, it would be interesting to understand how the mandatory Corporate Governance and Business Responsibility reports submitted by companies’ impact their stakeholder holder perception. Originality/value This study is unique in analyzing whether governance and sustainability rating of Indian corporate translate into stakeholder value creation.