Corporate Governance Dynamics and Firm Performance in Indian Public Sector Undertakings: A Pre- and Post-Pandemic Analysis
Article Sidebar
Main Article Content
Abstract
The issue of board structure and composition is also one of the consideration in the performance of the firm as well as the meaning and validity of the accounting-based indicators within organizations particularly regarding the Indian Public Sector Undertakings (PSU). This paper is part of the research undertaken in the accounting theory as it examines the impact of corporate governance mechanisms in measuring performance based on accounting and transparency and accountability systems. Particularly, it helps to establish a mental connection between governance systems and accounting, and the nature of the board is what predetermines the area of checking, recording, and interpreting financial data.
The correlation between the significant governance variables that constitute board size, the independence of the board, executive compensation and firm size and performance of 40 Public Sector Enterprises is tested empirically based on panel data of the research sample between F.Y. 201718-2024 25 that is related to the S.P.B.S.E. PSU Index. There is also a discussion on COVID-19 pandemic whereby the working of governance can be researched during a stable economic state and during the climate of uncertainty. Dependent variable is Return on Assets (ROA) which is an accounting based ratio which shows the level to which an organization utilizes its assets.
The results have defined that the composition of the boards is also a significant predictor of performance in accountants. Board independence, board size depicts a positive connection with ROA that implies that improved board governance systems increase effectiveness of the monitoring process, accountability and dependability and interpretation of accounting information. There is also positive correlation between the performance and executive remuneration and firm size.
The reflection of its outcome gives the theoretical accounts of the governance-accounting interface, which shows that board structures play an important role in increasing the transparency, accountability, and credibility of financial reports.
Article Details
Section
This work is licensed under a Creative Commons Attribution 4.0 International License.
How to Cite
References
1.Abidin, Z. Z., Kamal, N. M., & Jusoff, K. (2009). Board structure and corporate performance in Malaysia. International Journal of Economics and Finance, 1(1), 150-164.
2.Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of financial economics, 94(2), 291-309.
3.Ahmad, S., Mohti, W., Khan, M., Irfan, M., & Bhatti, O. K. (2024). Creating a bridge between ESG and firm's financial performance in Asian emerging markets: catalytic role of managerial ability and institutional quality. Journal of Economic and Administrative Sciences.
4.Ahmed, R., Khan, M., & Rehman, S. (2024). Corporate governance mechanisms and firm performance in developing economies. Corporate Governance: The International Journal of Business in Society, 24(2), 310–325.
5.Arora, A., & Sharma, C. (2016). Corporate governance and firm performance in developing countries: evidence from India. Corporate governance, 16(2), 420-436.
6.Arora, A., & Soni, T. K. (2023). An optimal proportion for independent directors in the boardroom: An empirical study. Business Perspectives and Research,.
7.Balasubramanian, N., Black, B. S., & Khanna, V. (2010). The relation between firm-level corporate governance and market value: A case study of India. Emerging Markets Review, 11(4), 319-340.
8.Balsmeier, B., Buchwald, A., & Stiebale, J. (2014). Outside directors on the board and innovative firm performance. Research Policy, 43(10), 1800-1815.
9.Barber, B. M., & Lyon, J. D. (1997). Detecting long-run abnormal stock returns: The empirical power and specification of test statistics. Journal of financial economics, 43(3), 341-372.
10.Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of management, 17(1), 99-120.
11.Boone, A. L., Field, L. C., Karpoff, J. M., & Raheja, C. G. (2007). The determinants of corporate board size and composition: An empirical analysis. Journal of financial Economics, 85(1), 66-101.
12.Campbell (2007). Why would corporations behave in socially responsible ways? an institutional theory of corporate social responsibility. Academy of Management Review, 32 (3).
13.Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity, and firm value. Financial Review, 38(1), 33–53.
14.Cersosimo, C. (2025). Board size and financial performance as a driver for social innovation. Administrative Sciences, 15(7), 247. (MDPI)
15.Chen, S., Song, Y., & Gao, P. (2023). Environmental, social, and governance (ESG) performance and financial outcomes: Analyzing the impact of ESG on financial performance. Journal of environmental management, 345, 118829.
16.Cheng, J. Y. J., Groysberg, B., Healy, P., & Vijayaraghavan, R. (2021). Directors’ perceptions of board effectiveness and internal operations. Management science, 67(10), 6399-6420.
17.Coles, J. L., Daniel, N. D., & Naveen, L. (2008). Boards: Does one size fit all? Journal of Financial Economics, 87(2), 329–356.
18.Degeorge, Francois, and Richard Zeckhauser. "The reverse LBO decision and firm performance: Theory and evidence." The Journal of Finance 48, no. 4 (1993): 1323-1348.
19.Demsetz, H., & Villalonga, B. (2001). Ownership structure and corporate performance. Journal of corporate finance, 7(3), 209-233.
20.Dogan, E., & Smyth, R. (2002). Board remuneration, company performance, and ownership concentration: Evidence from publicly listed Malaysian companies. ASEAN Economic Bulletin, 319-347.
21.Dong, Y., Feng, T., & Sheng, H. (2024). Digital-based business model design and firm performance: the mediating role of ambidextrous innovation. Journal of Business & Industrial Marketing, 39(11), 2309-2324.
22.Dwivedi, N., & Jain, A. K. (2005). Corporate governance and performance of Indian firms: The effect of board size and ownership. Employee responsibilities and rights journal, 17(3), 161-172.
23.El-Faitouri, R. (2014). Board of directors and Tobin’s Q: Evidence from UK firms. Journal of Finance and Accounting, 2(4), 82-99.
24.Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301-325.
25.Fama, E. F., & Jensen, M. C. (1985). Organizational forms and investment decisions. Journal of financial Economics, 14(1), 101-119.
26.Fauzi, F., & Locke, S. (2012). Board structure, ownership structure and firm performance: A study of New Zealand listed-firms.
27.Fayyaz, S., Lashari, A. A., Channar, H. B., Chang, M. A., Bano, N., & Buriro, S. A. (2023). Impacts of newly government-inducted teachers' performance on learners’ outcomes. Al-Qanṭara, 9(4), 262-279.
28.Forbes, D. P., and F. J. Milliken. 1999. "Cognition and Corporate Governance: Understanding Boards of Directors as Strategic Decision-Making Groups." Academy of Management Review 24: 489-505..
29.Ganguli, S.K. and Agrawal, S. (2009). Ownership structure and firm performance: an empirical study on listed mid-cap Indian companies. IUP Journal of Applied Finance, 15 , 37-51.
30.Ganguli, S. K., & Guha Deb, S. (2021). Board composition, ownership structure and firm performance: New Indian evidence. International Journal of Disclosure and Governance, 18(3), 256-268.
31.García-Sánchez, I. M., Hussain, N., Khan, S. A., & Martínez-Ferrero, J. (2021). Do markets punish or reward corporate social responsibility decoupling?. Business & Society, 60(6), 1431-1467.
32.Gil, A., Brouthers, L. E., & Keig, D. L. (2019). Top management team diversity, individualism–collectivism, and MNE performance. International Journal of Cross Cultural Management, 19(3), 273-290.
33.Goel, A., Dhiman, R., Rana, S., & Srivastava, V. (2022). Board composition and firm performance: Empirical evidence from Indian companies. Asia-pacific journal of business administration, 14(4), 771-789.
34.Guest, P. M. (2009). The impact of board size on firm performance: Evidence from the UK. European Journal of Finance, 15(4), 385–404.
35.He, L., & Jiang, M. (2022). CSR performance, executive compensation incentive and innovation investment of Chinese private enterprises under dynamic perspective. Scientific Programming, 2022(1), 3980713.
36.Hill, C. W. (1988). Differentiation versus low cost or differentiation and low cost: A contingency framework. Academy of management Review, 13(3), 401-412.
37.Hillman, A. J., Cannella Jr, A. A., & Harris, I. C. (2002). Women and racial minorities in the boardroom: how do directors differ?. Journal of management, 28(6), 747-763.
38.Hillman, A. J., Withers, M. C., & Collins, B. J. (2009). Resource dependence theory: A review. Journal of Management, 35(6), 1404–1427.
39.Illueca, M., Norden, L., & Udell, G. F. (2009). Liberalization, corporate governance, and savings banks. In EFA 2008 Athens meetings paper. innovative firm performance. Research Policy, 43(10), 1800–1815
40.Jain, S., Dhillon, L. K., Aggarwal, R., & Bagga, T. (2023). Corporate governance mechanism, ownership structure, and firm performance: Evidence from India. Indian Journal of Finance, 25-40.
41.Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. Journal of Finance, 48(3), 831–880.
42.Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of management journal, 42(5), 564-576.
43.Kao, M. F., Hodgkinson, L., & Jaafar, A. (2019). Ownership structure, board of directors and firm performance: evidence from Taiwan. Corporate Governance: The international journal of business in society, 19(1), 189-216.
44.Kirsch, A. (2018). Revolution from above? Female directors’ equality-related actions in organizations. Business & Society, 61(3), 572-605.
45.Kumar, P., & Zattoni, A. (2016). Executive Compensation, Board Functioning, and Corporate Governance. Corporate Governance: An International Review, 24(1).
46.Kumar, S., & Kapil, S. Gender Diversity, Firm Performance, and ESG: Evidence from Indian M&A Participating Firms.
47.Lipton, M. (1987). Corporate governance in the age of finance corporatism. U. Pa. L. Rev., 136, 1.
48.Manna, A., Sahu, T. N., & Gupta, A. (2016). Impact of ownership structure and board composition on corporate performance in Indian companies. Indian Journal of Corporate Governance, 9(1), 44-66.
49.Marashdeh, Z., Alomari, M. W., Khataybeh, M., & Alkhataybeh, A. (2021). Female representation on the boards of directors of non-financial companies. Journal of Governance and Regulation/Volume, 10(2).
50.Minichilli, A., Zattoni, A., & Zona, F. (2009). Making boards effective: An empirical examination of board task performance. British journal of management, 20(1), 55-74.
51.Morck, R., Shleifer, A., & Vishny, R. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20(1), 293-315.
52.Nahar Abdullah, S. (2006). Directors' remuneration, firm's performance and corporate governance in Malaysia among distressed companies. Corporate Governance. The International Journal of Business in Society, 6(2), 162-174.
53.Nguyen, D. V., Nguyen, N. H. K., & Dinh, T. T. (2023). CEO attributes and firm performance: Evidence from companies listed on Ho Chi Minh Stock Exchange. Cogent Economics & Finance, 11(2), 2282838.
54.Nguyen, P., & Nguyen, T. (2023). Board characteristics and firm performance: Evidence from developing economies. International Journal of Finance & Economics, 28(4), 4012–4026.
55.Orazalin, N. (2020). Corporate governance and sustainability performance. Journal of Asian Finance, Economics and Business, 7(9), 143–152.
56.Orazalin, N. (2023). Board attributes and corporate social responsibility performance. Sustainability, 15(6), 4987.
57.Orazalin, N., Ntim, C. G., & Malagila, J. K. (2024). Understanding the relation between climate change risks and biodiversity disclosures: an international analysis. Journal of Accounting Literature.
58.Pareek, R., Pandey, K. D., & Sahu, T. N. (2019). Corporate governance, firms’ characteristics and environmental performance disclosure practices of Indian companies. Indian Journal of Corporate Governance, 12(2), 142-155.
59.Pathan, S., Faff, R., Méndez, C. F., & Masters, N. (2016). Financial constraints and dividend policy. Australian Journal of Management, 41(3), 484-507.
60.Post, C., & Byron, K. (2015). Women on boards and firm financial performance: A meta-analysis. Academy of management Journal, 58(5), 1546-1571.
61.Puni, A., & Anlesinya, A. (2021). Corporate governance mechanisms and firm performance in emerging markets. Corporate Governance: The International Journal of Business in Society, 21(3), 463–479.
62.Rodríguez-Fernández, M., Fernández-Alonso, S., & Rodríguez-Rodríguez, J. (2023). Board diversity and corporate performance: A systematic review. Sustainability, 15(8), 6580.
63.Sahoo, S., Upadhyay, A., & Kumar, A. (2023). Circular economy practices and environmental performance: analysing the role of big data analytics capability and responsible research and innovation. Business Strategy and the Environment, 32(8), 6029-6046.
64.Saini, N., & Singhania, M. (2018). Corporate governance, globalization and firm performance in emerging economies: Evidence from India. International Journal of Productivity and Performance Management, 67(8), 1310-1333.
65.Sanan, N. K. (2016). Board gender diversity, financial and social performance of Indian firms. Vision, 20(4), 361-367.
66.Sarkar, J., & Sarkar, S. (2000). Large shareholder activism in corporate governance in developing countries: Evidence from India. International Review of finance, 1(3), 161-194.
67.Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The journal of finance, 52(2), 737-783.
68.Sierra-Morán, J., Cabeza-García, L., González-Álvarez, N., & Botella, J. (2024). The board of directors and firm innovation: A meta-analytical review. BRQ Business Research Quarterly, 27(2), 182-207.
69.Terjesen, S., Couto, E. B., & Francisco, P. M. (2016). Does the presence of independent and female directors impact firm performance? A multi-country study of board diversity. Journal of Management & Governance, 20(3), 447-483.
70.Ting, I. W. K., Azizan, N. A., Bhaskaran, R. K., & Sukumaran, S. K. (2019). Corporate social performance and firm performance: Comparative study among developed and emerging market firms. Sustainability, 12(1), 26.
71.Torres, J., De La Puente, M., Morales, G., Arcón, J. C. C., & Zapata, H. E. G. (2025). Collaborative Design Practices and Firm Performance: An Empirical Study of Small Design Companies in the Colombian Caribbean Region. The International Journal of Design Management and Professional Practice, 19(2), 135.
72.Tulung, J. E., & Ramdani, D. (2018). Independence, size and performance of the board: An emerging market research. Corporate Ownership & Control, 15(2).
73.Valeria, N. (2019). Corporate governance and board of directors: The effect of a board composition on firm sustainability performance. Journal of Cleaner Production, 237.
74.Vandenbroucke, E., Knockaert, M., & Ucbasaran, D. (2016). Outside board human capital and early stage high–tech firm performance. Entrepreneurship Theory and Practice, 40(4), 759-779.
75.Wijaya, H. (2024). Board size and firm productivity: Evidence from Indonesian manufacturing firms. Jurnal Akuntansi dan Keuangan, 26(1), 1–12.
76.Xu, Jian, and Jingsuo Li. "The interrelationship between intellectual capital and firm performance: evidence from China's manufacturing sector." Journal of intellectual capital 23.2 (2022): 313-341.
77.Xuezhou, W., Hussain, R. Y., Salameh, A. A., Hussain, H., Khan, A. B., & Fareed, M. (2022). Does firm growth impede or expedite insolvency risk? A mediated moderation model of leverage maturity and potential fixed collaterals. Frontiers in Environmental Science, 10, 841380.
78.Yermack, D. (1996). Higher market valuation of companies with small boards of directors. Journal of Financial Economics, 40(2), 185–211.
79.Zhang, D., Rong, Z., & Ji, Q. (2019). Green innovation and firm performance: Evidence from listed companies in China. Resources, conservation and recycling, 144, 48-55.