Joint impact of corporate governance and risk disclosures on firm value: Evidence from emerging markets

Abstract

We examine the joint impact of corporate risk disclosures (CRD) and board-centered corporate governance (CG) constructs such as board size, board meetings attended, number of female directors on board, number of executive and non-executive directors, and CEO duality on firm value. We consider a sample of 205 non-financial Indian firms listed on Bombay Stock Exchange, employing fixed effect panel regressions. We argue that the impact of CRD or CG mechanisms on firm value cannot be examined in isolation. A joint examination of both CRD and CG mechanisms reveals positive association between CRD and firm value. However, this significant positive association is attenuated owing to CEO duality. Additionally, number of female directors on the board has a positive and significant impact on firm value indicating gender diversity benefits to the firms. As a robustness check, we also undertook GMM estimations to capture endogeneity and in turn obtained results that are in line with panel estimations. The study’s findings have policy implications when it comes to board composition of Indian non-financial firms that should explore avenues to eliminate CEO duality in order to have CRDs an undiminished positive impact on firm value.