Investigating the Nexus between Corporate Governance and Firm Performance in India: Evidence from COVID-19
Abstract
:1. Introduction
Motivation of the Study
2. Literature Review and Hypothesis Development
2.1. Corporate Governance and Firm Performance before COVID-19
2.2. Corporate Governance and Firm Performance during COVID-19
3. Research Methodology
3.1. Sample Size and Period of Study
3.2. Data Collection and Variable Measurement
3.3. Research Tools and Techniques
3.4. Model Specification
4. Results and Findings
4.1. Descriptive Statistics
4.2. Correlation and VIF
4.3. T-Test Analysis
4.4. Regression Results of the Full Sample
4.5. Alternative Analysis: Regression Results of Year-Wise Subsample
4.6. One-Way ANOVA Results
5. Discussion
6. Implications of the Study
7. Conclusions
Author Contributions
Funding
Data Availability Statement
Conflicts of Interest
1 | https://www.worldometers.info/coronavirus/country/india/ (accessed on 9 March 2022). |
2 | https://www1.nseindia.com/products/content/equities/indices/nifty_200.htm (accessed on 9 March 2022). |
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S. No. | Variable Name | Definition and Measurement | Symbol |
---|---|---|---|
Panel A: Independent Variables | |||
1 | Board Size | Number of directors on the board | BS |
2 | Board Independence | Percentage of independent directors | BI |
3 | Women Directorship | Percentage of female directors | WD |
4 | Board Meetings | Number of meetings held by the board during the year | BM |
5 | Board Attendance | Average attendance of all the directors in the board meetings | BA |
6 | Audit Committee Size | Number of directors on audit committee | ACS |
7 | Audit Committee Meetings | Number of meetings held by audit committee during the year | ACM |
8 | Board Busyness | Percentage of directors holding directorship in other companies | BB |
Panel B: Dependent Variables | |||
1 | Return on Assets | Percentage of profit after tax over total assets | ROA |
2 | Q Ratio | (Market value of equity + Book value of preference share + book value of non-tradable debt)/Book value total assets | Tobin’s Q |
Panel C: Control Variables | |||
1 | Firm Size | Natural log value of total assets | FS |
2 | Firm Age | Number of years since the firm was incorporated | FA |
3 | Firm Leverage | Debt to equity ratio | LEV |
4 | Growth | Natural log of revenue from operation | G |
5 | R&D expenditure | Natural log of average expenditure by the company on research and development activities +1 | R&D |
Variable | Observation | Mean | Std. Dev. | Minimum | Maximum |
---|---|---|---|---|---|
Board Size | 302 | 10.26 | 2.49 | 4 | 20 |
Board Independence | 302 | 48.84 | 12.10 | 18.18 | 85.71 |
Women Directorship | 302 | 16.66 | 8.63 | 0 | 50 |
Board Meetings | 302 | 6.66 | 2.49 | 4 | 19 |
Board Attendance | 302 | 92.46 | 6.74 | 64 | 100 |
Audit Committee Size | 302 | 4.18 | 1.09 | 3 | 9 |
Audit Committee Meetings | 302 | 5.82 | 2.20 | 1 | 19 |
Board Busyness | 302 | 78.70 | 21.79 | 10 | 100 |
ROA | 302 | 9.61 | 11.80 | −31.95 | 144.26 |
Tobin’s Q | 302 | 3.78 | 4.37 | 0.039 | 32.81 |
Firm Size | 302 | 11.92 | 1.28 | 8.99 | 16.08 |
Firm Age | 302 | 44.79 | 25.97 | 5 | 158 |
Leverage | 302 | 0.55 | 2.28 | −0.1 | 35.34 |
Growth | 302 | 11.39 | 1.39 | 7.30 | 15.55 |
R&D | 302 | 4.87 | 3.50 | 0 | 11.71 |
Variable | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
BS | 1.000 | ||||||||||||
BI | −0.004 | 1.000 | |||||||||||
WD | 0.121 | −0.105 | 1.000 | ||||||||||
BM | 0.016 | 0.335 | 0.124 | 1.000 | |||||||||
BA | 0.147 | 0.029 | −0.041 | 0.155 | 1.000 | ||||||||
ACS | −0.266 | −0.181 | 0.088 | 0.014 | −0.032 | 1.000 | |||||||
ACM | −0.043 | −0.111 | 0.045 | −0.472 | −0.073 | −0.054 | 1.000 | ||||||
BB | −0.018 | −0.142 | −0.036 | 0.072 | 0.04 | 0.093 | −0.031 | 1.000 | |||||
FS | −0.074 | 0.061 | −0.034 | −0.039 | 0.007 | 0.079 | −0.176 | −0.038 | 1.000 | ||||
FA | −0.087 | −0.060 | 0.016 | 0.004 | 0.063 | 0.001 | −0.048 | 0.089 | −0.013 | 1.000 | |||
G | −0.084 | 0.008 | 0.003 | −0.163 | −0.156 | 0.037 | 0.082 | −0.033 | −0.653 | −0.035 | 1.000 | ||
LEV | 0.015 | −0.095 | 0.006 | −0.168 | −0.002 | 0.039 | 0.012 | 0.040 | −0.107 | 0.052 | 0.044 | 1.000 | |
R&D | −0.102 | −0.167 | 0.049 | 0.018 | −0.093 | 0.088 | 0.031 | 0.068 | −0.006 | −0.163 | −0.253 | 0.108 | 1.000 |
VIF | 1.22 | 1.33 | 1.11 | 1.92 | 1.10 | 1.51 | 1.18 | 1.06 | 2.47 | 1.10 | 2.60 | 1.09 | 1.31 |
TV | 0.82 | 0.75 | 0.90 | 0.52 | 0.91 | 0.66 | 0.85 | 0.94 | 0.41 | 0.91 | 0.38 | 0.92 | 0.76 |
Variables | Pre-COVID-19 Phase | COVID-19 Phase | Mean Difference (μd) | T | ||||
---|---|---|---|---|---|---|---|---|
Obs. | Mean (μ1) | Std. Dev. | Obs. | Mean (μ2) | Std. Dev | |||
BS | 151 | 10.75 | 2.99 | 151 | 10.22 | 2.58 | −0.529 | −3.920 * |
BI | 151 | 55.40 | 1.62 | 151 | 50.90 | 1.57 | −4.44 | −4.052 * |
WD | 151 | 16.90 | 0.86 | 151 | 17.00 | 0.87 | 0.100 | 0.271 ** |
BM | 151 | 6.56 | 2.94 | 151 | 6.60 | 2.42 | 0.033 | 0.164 |
BA | 151 | 88.62 | 8.09 | 151 | 89.88 | 6.72 | 1.268 | 1.999 ** |
ACS | 151 | 4.45 | 1.19 | 151 | 4.23 | 1.03 | −0.222 | −2.990 ** |
ACM | 151 | 5.64 | 2.15 | 151 | 5.81 | 2.28 | 0.170 | 1.352 |
BB | 151 | 79.61 | 23.05 | 151 | 80.73 | 22.77 | 1.112 | 0.913 |
ROA | 151 | 10.34 | 8.33 | 151 | 10.22 | 14.20 | −0.110 | −0.116 |
Tobin’s Q | 151 | 3.55 | 3.45 | 151 | 2.96 | 3.61 | −0.590 | −3.543 * |
FS | 151 | 5.109 | 0.57 | 151 | 5.144 | 0.56 | 0.035 | 3.803 * |
FA | 151 | 43.08 | 25.90 | 151 | 44.07 | 25.91 | 0.986 | 107.126 * |
G | 151 | 4.97 | 0.61 | 151 | 4.93 | 1.55 | −0.010 | −0.861 |
LEV | 151 | 0.37 | 0.58 | 151 | 0.50 | 1.23 | 0.126 | 1.659 *** |
R&D | 151 | 2.234 | 1.52 | 151 | 2.315 | 1.55 | 0.081 | 1.225 |
Independent Variables | ROA | Tobin’s Q | ||
---|---|---|---|---|
−1 | −2 | −1 | −2 | |
BS | −0.090(0.805) | −0.079 (0.807) | 0.153 (0.188) | 0.154 (0.189) |
BI | 0.790 (0.996) | 0.788 (0.999) | −0.036 (0.233) | −0.036 (0.234) |
WD | −1.507 (1.233) | −1.513 (1.236) | −0.518 (0.289) *** | −0.518 (0.290) *** |
BM | 0.018 (0.270) | 0.014 (0.271) | −0.681 (0.063) | −0.068 (0.063) |
BA | 0.069 (0.082) | 0.071 (0.083) | −0.001 (0.019) | −0.001 (0.019) |
ACS | 0.593 (0.786) | 0.593 (0.788) | −0.002 (0.184) | −0.002 (0.184) |
ACM | 0.416 (0.436) | 0.438 (0.438) | 0.002 (0.102) | 0.002 (0.102) |
BB | 0.088 (0.047) *** | 0.088 (0.048) ** | 0.027 (0.011) ** | 0.027 (0.011) ** |
FS | −75.55 (5.53) * | −75.68 (5.55) * | −8.715 (1.298) * | −8.721 (1.303) * |
FA | 3.254 (0.731) * | −0.053 (5.575) | −0.183 (0.171) | −0.361 (1.303) |
G | 8.328 (4.141) ** | 8.270 (4.151) ** | 1.982 (0.970) ** | 1.979 (0.974) ** |
LEV | −2.628 (0.703) * | −2.641 (0.705) * | −0.096 (0.164) | −0.096 (0.165) |
R&D | −0.113 (0.780) | −0.110 (0.782) | −0.119 (0.182) | −0.119 (0.183) |
Constant | 196.167 (42.327) * | 339.614 (243.33) | 44.148 (9.919) * | 51.843 (57.096) |
Year dummy | No | Yes | No | Yes |
2021 | --- | 3.308 (5.526) | --- | 0.177 (1.296) |
F statistics | 16.21 | 15.01 | 5.14 | 5.11 |
R2 | 0.262 | 0.159 | 0.47 | 0.36 |
Observation | 302 | 302 | 302 | 302 |
Hausman test for model selection | ||||
χ2 | 17.60 | 21.45 | 85.86 | 61.25 |
p-value | 0.0041 | 0.0012 | 0.0000 | 0.0000 |
Model selection | Fixed Effect | Fixed Effect | Fixed Effect | Fixed Effect |
Independent Variables | ROA | Tobin’s Q | ||
---|---|---|---|---|
2020 | 2021 | 2020 | 2021 | |
BS | 0.200 (0.309) | 1.514 (0.608) ** | 0.084 (0.141) | −0.019 (0.165) |
BI | −0.344 (0.562) | −1.514 (1.002) *** | 0.056 (0.256) | 0.229 (0.272) |
WD | 1.144 (0.625) *** | −0.718 (1.164) | 0.070 (0.285) | −0.092 (0.316) |
BM | 0.181 (0.233) | −0.511 (0.581) | −0.127 (0.106) | −0.078 (0.158) |
BA | 0.043 (0.066) | 0.018 (0.152) | 0.016 (0.030) | 0.005 (0.041) |
ACS | 0.392 (0.469) | 0.073 (1.048) | −0.074 (0.214) | 0.058 (0.285) |
ACM | 0.845 (0.333) ** | 1.400 (0.596) ** | 0.370 (0.152) ** | 0.157 (0.162) |
BB | −0.048 (0.023) ** | 0.044 (0.045) | −0.003 (0.010) | −0.0002 (0.122) |
FS | −9.606 (1.582) * | −19.97 (2.857) * | −4.595 (0.721) * | −4.812 (0.777) * |
FA | 0.002 (0.021) | −0.230 (0.039) | 0.018 (0.009) *** | 0.015 (0.010) |
G | 4.018 (1.429) * | 11.153 (2.553) * | 1.390 (0.651) ** | 2.806 (0.695) * |
LEV | −5.088 (0.926) | −2.608 (0.839) * | −0.503 (0.422) | −0.152 (0.228) |
R&D | 0.488 (0.395) | 0.391 (0.692) | 0.106 (0.181) | −0.232 (0.188) |
Constant | 30.246 (8.802) | 47.028 (17.258) | 15.871 (4.015) | 11.822 (4.697) ** |
F statistics | 8.82 | 6.44 | 5.87 | 4.47 |
Adjusted R2 | 0.402 | 0.319 | 0.295 | 0.230 |
Observation | 151 | 151 | 151 | 151 |
Variables | Source | SS | Df | MS | F | p-Value |
---|---|---|---|---|---|---|
ROA | Between groups | 2839.00 | 12 | 236.58 | 3.89 | 0.0000 |
Within groups | 8383.73 | 138 | 60.75 | |||
Total | 11,222.73 | 150 | 74.82 | |||
Tobin’s Q | Between groups | 738.95 | 12 | 61.58 | 2.98 | 0.0010 |
Within groups | 2847.02 | 138 | 20.63 | |||
Total | 3585.97 | 150 | 23.91 |
Industry | ROA | Tobin’s Q | ||||
---|---|---|---|---|---|---|
Mean | Std. Dev | Rank | Mean | Std. Dev | Rank | |
Automobile | 7.306 | 6.366 | 08 | 2.733 | 1.402 | 08 |
Chemicals, Fertilisers, and Pesticides | 8.153 | 4.285 | 07 | 4.924 | 3.693 | 04 |
Cement and Construction | 3.645 | 4.552 | 10 | 2.261 | 1.192 | 09 |
Consumer Goods and Textiles | 10.343 | 11.057 | 06 | 7.963 | 6.081 | 01 |
Industrial Manufacturing | 5.209 | 6.374 | 09 | 2.078 | 1.571 | 11 |
Information Technology | 17.207 | 6.968 | 02 | 6.662 | 2.927 | 02 |
Media and Entertainment | 17.955 | 11.334 | 01 | 2.056 | 0.462 | 12 |
Metals | 11.377 | 9.842 | 04 | 2.290 | 3.368 | 10 |
Oil and Gas | 10.549 | 6.068 | 05 | 5.044 | 8.935 | 03 |
Pharmaceutical | 11.594 | 5.394 | 03 | 3.992 | 2.072 | 05 |
Power | 2.663 | 1.892 | 11 | 2.994 | 4.540 | 07 |
Services (Healthcare and Other) | 2.144 | 8.962 | 12 | 3.438 | 3.415 | 06 |
Telecom | −3.199 | 10.999 | 13 | 0.874 | 0.681 | 13 |
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Anas, M.; Gulzar, I.; Tabash, M.I.; Ahmad, G.; Yazdani, W.; Alam, M.F. Investigating the Nexus between Corporate Governance and Firm Performance in India: Evidence from COVID-19. J. Risk Financial Manag. 2023, 16, 307. https://doi.org/10.3390/jrfm16070307
Anas M, Gulzar I, Tabash MI, Ahmad G, Yazdani W, Alam MF. Investigating the Nexus between Corporate Governance and Firm Performance in India: Evidence from COVID-19. Journal of Risk and Financial Management. 2023; 16(7):307. https://doi.org/10.3390/jrfm16070307
Chicago/Turabian StyleAnas, Mohd, Ishfaq Gulzar, Mosab I. Tabash, Gayas Ahmad, Wasi Yazdani, and Md. Firoz Alam. 2023. "Investigating the Nexus between Corporate Governance and Firm Performance in India: Evidence from COVID-19" Journal of Risk and Financial Management 16, no. 7: 307. https://doi.org/10.3390/jrfm16070307