The Indian Corporate Board Efficiency and its Impact on Financial Performance

Mohd Sarim

doi:10.17762/turcomat.v12i5.2268

Abstract

The objective of the study is to explore the board characteristics and its impact on the ﬁnancial performance of Indian companies. The sample comprises of top 100 companies listed on the Bombay Stock Exchange for the financial year 2018-2019. The data required for the analysis was collected from the annual reports of the companies available at their respective websites and from the Prowess database of the Centre for Monitoring of Indian Economy. The paper constructed sub-indices for the board as board composition index, board independence index and board disclosure index. Combining all sub-indices, we formed the Board Composite Index. Further, the data was analysed to draw meaningful conclusions. Firm size is used as a controlling variable. The results show that there is a strong relationship between board indicators and return on asset.

Highlights

The financial performance of companies is largely affected by the corporate governance characteristics which in the recent past has invited the due attention of the researchers to explore the performance of companies as a relationship with corporate governance characteristics
Data for financial performance is obtained from the Prowess database of Centre for Monitoring of Indian Economy (CMIE)
For measuring the impact of board index on performance the paper tested the hypotheses – There is no significant influence of board index/board sub-indices on performance of companies

Summary

Introduction

The financial performance of companies is largely affected by the corporate governance characteristics which in the recent past has invited the due attention of the researchers to explore the performance of companies as a relationship with corporate governance characteristics. The corporate governance plays an important in monitoring the affairs of the company. Financial misappropriation due to weak of governance structure and mechanism hampers the trust of the shareholders. A good corporate governance mechanism is required to curb the unfair practices. Abnormalities in financial system may be prevented. Abnormalities in financial system may be prevented. (Smaili et al, 2016)

Literature Review

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