Board Size and Corporate Financial Performance: An Investigation

Kathuria, Vinish; Dash, Shridhar

doi:10.1177/0256090919990303

Cited by 38 publications

(35 citation statements)

References 23 publications

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“…The board index which consist of composition and meetings has been found to have a negative and significant association on firm performance of selected IT companies in India (Palaniappan and Rao, 2015). Kathuria and Dash (1999) observed that size of the board increased with the size of the corporation. Using a sample of top Indian Bombay Stock Exchange (BSE)-listed companies, Jackling and Johl (2009) had also showed significant positive correlation between firm size and size of the board (Kumar and Singh, 2013).…”

Section: Literature Reviewmentioning

confidence: 97%

“…The larger boards tend to have a negative influence on firm performance, judged in terms of either accounting-or marketbased measures of performance. CEO duality has a significant effect on the firm performance Ghosh (2006), Kathuria and Dash (1999), Lipton and Lorsch (1992) 2 Clause 49 along with other recommendations has emphasized the role of independent directors over executive directors for better governance structure. So board composition is a natural variable of interest in relation to firm's performance Kumar and Singh (2012)…”

Section: Conceptual Model and Research Hypothesismentioning

confidence: 99%

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Determinants of corporate financial performance relating to board characteristics of corporate governance in Indian manufacturing industry

Palaniappan¹

2017

EJMBE

105

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Purpose-The purpose of this paper is to examine if certain board characteristics have an impact on the financial performance of manufacturing firms in India. Design/methodology/approach-The study draws on data from 275 firms listed in NSE during from 2011 to 2015, using a multiple regression model. The present study examines the effect of board characteristics such as board size, CEO duality, independence and board activity devoted to the effectiveness of firms performance regarding market and accounting based financial performance measures. Findings-The finding supports an inverse association between the extent of board characteristics and the firms' performance indicators. The study also finds a statistically significant negative relationship between board size and Tobins Q, ROA and ROE. The evidence also shows that the board independence and meeting frequency moderate the relationship between return on equity and return on assets by enhancing these measures among corporate governance mechanisms. Research limitations/implications-The present study does not include all possible board characteristics, i.e., large shareholders dominance on the board and promoter's and institutional shareholding, to support firm's performance. Further research might include the ownership structure of the board to improve firm's performance. Originality/value-The study focuses on the corporate governance issues such as size, duality, independence and activity of the boards and their influence on firm performance. The subject analyzes the possible impact of board characteristics and firm-related features that have received much attention from academic research, which has largely focused on studying the publications of corporate governance in India and Asian context.

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Section: Literature Reviewmentioning

confidence: 97%

Section: Conceptual Model and Research Hypothesismentioning

confidence: 99%

Determinants of corporate financial performance relating to board characteristics of corporate governance in Indian manufacturing industry

Palaniappan¹

2017

EJMBE

105

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“…The Companies Bill, 2013 has proposed a maximum of 15 directors unless a higher number is approved by the members through a special resolution. In India, empirical data from three studies found the median size of boards ranging from 8 to 11 [8] [9] [10] investigated the board size, with corporate financial performance using data of 504 corporations belonging to 18 industries and found that the size of the board played an important role in influencing the financial performance of corporations. The same results were predicted by [11] [12] [13] [14].…”

Section: Board Characteristics and Firm Performancementioning

confidence: 99%

Board Characteristics, Audit Committee and Ownership Structure Influence on Firm Performance of Manufacturing Firms in India

Gurusamy¹

2017

IJBER

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Abstract:The study investigates the relationship and impact of corporate governance measures such as board characteristics, audit committee and Ownership Structure on the financial performance of the selected manufacturing firms listed in Bombay Stock Exchange (BSE). The study empirical in nature and applies panel data regression analysis to a sample of 357 manufacturing firms listed in BSE during the period 2006-2015. The study found that board size is positively and significantly linked to both the financial performance measures, i.e. Return on assets (ROA) and Return on Equity (ROE) but the negative and insignificant impact in case of Tobin's Q. Audit committee independence is significant and negatively affected by ROE. The same promoters' shareholding is negatively and significantly related to all the financial measures and there is an insignificant negative relationship between institutional shareholding and both financial performance measures (Tobin's Q and ROA). The study implies that to improve the performance and accordingly the value of firms, the percentage of promoters' ownership should be decreased as it has positive linkages with the financial performance. The board members have potential knowledge and expertise in the field should be increased as it has aligned with accounting based financial performance. Further, it will help the investors to pay special attention to the corporate governance, audit committee and type of ownership of firms while making the investments.

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“…Higher shareholding led to better monitoring of management and greater transparency of operations. The other reasons for better performance may be availability of funds at lower cost, use of advanced technology, better managerial and marketing practices and access to intangible assets of Parent Corporation (Kathuria and Dash 1999). It is, thus, hypothesized that foreign shareholding leads to better firm performance.…”

Section: Foreign Shareholding and Firm Performancementioning

confidence: 99%

“…Pearce & Zahra (1992) and Dalton et al (1999) predicted positive relationship between board size and firm performance. Kathuria and Dash (1999) conducted a study to examine the relationship between board size and firm performance based on 504 Indian firms from 18 industries. Findings of the study revealed that the performance improved if the board size increased, but the contribution of an additional board member decreased as the size of the corporation increased.…”

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confidence: 99%

Corporate Governance Structure and Performance of Indian Companies

Chauhan

Pasricha

2010

Indian Journal of Corporate Governance

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This study investigates the relationship between corporate governance structure and performance of Indian companies. The main objective of this study is to examine the impact of selected board characteristics and ownership structure on the firm performance. This analysis ranges over a period of six years, from 2001-02 to 2006-07 and is based on Pharmaceutical and IT industry. Least square dummy variable regression model has been used to study the relationship. We find that while board size, listing status of firm and foreign shareholding has positive and significant relationship with firm performance, public shareholding has negative and significant impact. However, independent director proportion, participation rate of independent directors and separation of Chairman and CEO post does not have a significant relationship with firm performance.Empirical studies conducted to study the relationship between board attributes, ownership structure and firm performance has shown mixed results. Board Size and Firm PerformanceStudies conducted by researchers show that size of the board does matter. Lipton and Lorsch (1992) and Jensen (1993) suggested that large boards can be less effective than smaller boards. The view put forward by previous researchers is that with increase in board size, agency problems too increase and the board becomes more symbolic and lesser part of the management process. Study conducted by Yermack (1996) to investigate the relationship between board size and firm performance based on 452 US firms for the period 1984 to 1991 revealed inverse association between board size and firm value. Haniffa and Hudaib (2006) in their study based on market based measures suggested that a large board was less effective in monitoring firm performance and companies with bigger boards had to bear heavy compensation cost, however, results based on accounting return suggested that large boards provided diversity in contracts, experience and expertise which led to better performance. Garg (2007) observed that poor performance led to increase in board size, which in turn hampered performance. He concluded that smaller boards were more efficient as compared to larger boards and ideal board size should be six. Similar results were found by Guest (2009) who also examined the impact of board size on firm performance for a large sample of 2746 listed firms in UK over 1981-2002. He found that board size had a negative relationship with firm profitability. He put forth the view that problems of poor communication and decision-making reduced effectiveness of large board. While above researchers found inverse relationship between board size and firm performance, some also predicted positive relationship. Pearce & Zahra (1992) and Dalton et al. (1999) predicted positive relationship between board size and firm performance. Kathuria and Dash (1999) conducted a study to examine the relationship between board size and firm performance based on 504 Indian firms from 18 industries. Findings of the study revealed that the performance ...

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Board Size and Corporate Financial Performance: An Investigation

Cited by 38 publications

References 23 publications

Determinants of corporate financial performance relating to board characteristics of corporate governance in Indian manufacturing industry

Determinants of corporate financial performance relating to board characteristics of corporate governance in Indian manufacturing industry

Board Characteristics, Audit Committee and Ownership Structure Influence on Firm Performance of Manufacturing Firms in India

Corporate Governance Structure and Performance of Indian Companies

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