Corporate Governance Mechanisms and Firm Performance: Lessons from India (India Studies in Business and Economics)

This book begins by analysing the various corporate governance mechanisms explored in the extant literature and determining their effectiveness in enhancing the firm value using multivariate analysis. The findings are of global relevance as the corporate governance regulations of most countries focus on independent directors as the mainstay of good governance. The empirical evidence from the first objective of this study corroborates the claim that independent directors do not strengthen the firms’ governance quality. The book is one of the few works to have analysed the possible reasons behind the ineffectiveness of the independent directors. Also, in view of the famous concept of the bundle of governance mechanisms, it might be possible that the independent directors strengthen the firms’ governance quality indirectly by strengthening other governance mechanisms. This aspect too has little precedence. This study adopts a novel moderation and mediation approach to analyse the monitoring behaviour of independent directors in relation to other governance mechanisms. The work is a must read for corporate players as well as researchers and scholars studying this discipline. Preface Acknowledgements Contents About the Authors Abbreviations List of Figures List of Tables List of Appendices 1 Introduction 1.1 Background 1.2 Overview of the Study 1.3 Research Questions 1.4 Research Objectives 1.5 Significance of the Study 1.6 Organization of the Monograph/Book Chapters Annexure I References 2 Evolution of Corporate Governance in India 2.1 Evolution of Corporate Governance in India 2.2 Legal Evolution of Corporate Governance in India 2.3 Provisions of the Revised Clause 49 of the Listing Agreement 2.3.1 Independent Directors 2.3.2 Code of Conduct 2.3.3 Audit, Nomination and Remuneration Committees 2.3.4 Subsidiary Companies 2.3.5 Related Party Transactions (RPTs) 2.3.6 Remuneration and Shareholding of Non-executive Directors 2.4 Recent Regulatory Developments on Corporate Governance 2.5 Alternate Corporate Governance Mechanisms 2.5.1 Ownership Structure 2.5.2 Board Monitoring 2.5.3 Audit Quality 2.5.4 Market for Corporate Control 2.5.5 Product Market Competition 2.6 Interrelationship Among Corporate Governance Mechanisms 2.6.1 Performance Enhancement Effect of Board Independence (Through Other Governance Mechanisms) 2.6.2 Mechanisms Diluting the Effectiveness of Board Independence 2.7 Summary References 3 Research Methodology 3.1 Introduction 3.2 Research Objectives and Research Hypotheses 3.3 Scope of the Study 3.3.1 Why Study an Emerging Economy? 3.3.2 Why Study Indian Companies? 3.3.3 Period of the Study 3.3.4 Sample Selection Process 3.4 Research Methodology 3.4.1 Measures/Proxies 3.4.2 Research Methodologies Used 3.4.3 Sources of Data and Research Tools Used 3.5 Summary and Conclusion References 4 Corporate Governance Mechanisms and Firm Performance 4.1 Introduction 4.2 Methodology 4.2.1 Sample and Scope 4.2.2 Research Methodology 4.2.3 Layout of Empirical Analysis 4.3 Analysis and Findings 4.4 Discussion 4.5 Implications and Recommendations 4.6 Summary and Conclusion Appendices References 5 Performance Enhancement Effect of Board Independence 5.1 Introduction 5.2 Methodology 5.2.1 Measures and Scope 5.2.2 Research Methodology 5.2.3 Layout of Empirical Analysis 5.3 Analysis and Findings 5.3.1 Board Independence, Audit Quality and Firm Performance 5.3.2 Board Independence, Foreign Institutional Investment and Firm Performance 5.4 Discussion 5.5 Implications and Recommendations 5.6 Summary and Conclusion Appendices Empirical Results Testing the Mediation Effect of Audit Quality (Objective 5.1) Empirical Results Testing the Mediation Effect of FII (Objective 5.2) References 6 Constraints Diluting the Effectiveness of Board Independence 6.1 Introduction 6.2 Methodology 6.2.1 Measures and Scope 6.2.2 Research Methodology 6.2.3 Layout of Empirical Analysis 6.3 Analysis and Findings 6.3.1 Promoter Ownership, Board Independence and Firm Performance 6.3.2 Product Market Competition, Board Independence and Firm Performance 6.4 Discussion 6.5 Implications and Recommendations 6.6 Summary and Conclusion Appendices References 7 Concluding Observations 7.1 Major Findings from the Research 7.2 Recommendations from the Study 7.3 Contributions of the Study 7.4 Limitations and Scope for Future Research 7.5 Concluding Observations