We extend the corporate governance literature by examining the effect of independent directors on firm value in the context of regulatory stipulation, considering all firms listed on the National Stock Exchange from 2004 to 2017. We examined the impact during the pre‐and post‐regulation period using the difference in difference analysis. The results indicate a positive effect of board independence on firm value. Our results show that the presence of independent directors is high in the post‐mandate period compared to the pre‐mandate period, indicating that firms are complying with regulations with more than 50% of independent directors on the board. Our results align with resource dependency theory, providing evidence that a higher number of outsider directors on a board acts as an additional resource for firms. When CEO duality is absent, the role of independent directors decreases and consequently the regulatory mandate based on CEO duality is effective. Thus, independent directors are significant providers of resources to a firm's governance in emerging economies, especially in the post‐mandate period.

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This study examines how excess cash drives earnings management and firm value in China. Using a fixed effect panel regression on a sample of 12,629 observations covering 300 firms listed in the Shanghai Stock Exchange, we find that excess cash has a positive impact on firm value confirming pecking order theory. Our results show that earnings management has a negative impact on firm value in China, which supports the efficient earnings management view. We find that managers in Chinese firms are less likely to use excess cash for manipulating earnings. We provide empirical evidence that firms with excess cash seem to use it more for precautionary purpose than earnings management and the excess corporate liquidity of Chinese firms is used for value-enhancing activities. The test of robustness using the Instrumental Variable (IV) model confirms the results of the study. Our study merges two areas of corporate finance by incorporating agency problems concerning earnings management and cash holdings

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Purpose This study aims to examine the effectiveness of governance in state-owned enterprises (SOEs) and explores if board independence enhances the firm value of SOEs in India and China. The study further explores the moderation impact of promoter ownership in enhancing firm value. Design/methodology/approach The study is confined to government-owned enterprises in India and China and is based on a sample of 53 central government-owned firms listed in National Stock Exchange of India and 110 state-owned firms listed in Shanghai Stock Exchange of China for the period 2010–2017. A fixed-effect panel regression analysis has been used to examine the effect of board independence on firm value. Findings The study found that board independence adds value to the SOEs in India and China and the presence of independent directors (IDs) in the board of SOEs act as better monitors of performance to protect the interest of minority shareholders. Probably, they minimize agency conflict and provide resources to the firm and management. The greater the government shareholdings, the board independence further enhances value of SOEs in India and China. Practical implications Compliance with guidelines on IDs in SOEs serves as an effective corporate governance mechanism and the presence of IDs can signal better firm performance. The government promoters align with the IDs in better monitoring of SOE performance. Originality/value The study is unique and contributes to the literature by examining the impact of board independence on firm value in the context of SOEs in India and China and also provides insight on the effect of promoter ownership on the effectiveness on board independence.