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Firm performance, vertical agency crisis and corporate governance of Indian listed companies

Firm performance, vertical agency crisis and corporate governance of Indian listed companies This study aims to examine the influence of corporate governance variables on firm performance and also to find out whether the corporate governance mechanism is capable of mitigating the vertical agency crisis. Here the researcher uses corporate governance mechanisms such as board meeting frequency, board independence, percentage of non-executive directors, percentage of woman directors on board and the board size to measure the firm performance and, at the same time, tries to mitigate the agency crisis, which is measured through return on asset and asset turnover ratio.Design/methodology/approachThe present study considers period from 2009 to 2020 with data corresponding to a panel of 271 non-financial firms listed in 500 NSE index, India. The study introduces a panel regression model to analyze the data collected from the sample firms.FindingsThe study detects a positive as well as a statistically significant relationship between board size and vertical agency cost. The study also observes a negative relationship between board independence and agency cost. Further, the study finds a positive relationship between corporate governance variables and firm performance, though it is non-significant.Originality/valueAs the study progresses, the study detects a negative relationship between non-executive directors and agency costs. This study tries to give policy prescription to the corporate policymaker regarding various measures to be taken by the firm for the improvement of firm performance and reduction of owner and manager conflict inside the company. The study fills the literature gap by revealing a significant relationship between corporate governance, vertical agency crisis and firm performance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asian Journal of Economics and Banking Emerald Publishing

Firm performance, vertical agency crisis and corporate governance of Indian listed companies

Firm performance, vertical agency crisis and corporate governance of Indian listed companies

Asian Journal of Economics and Banking , Volume 7 (1): 13 – Mar 24, 2023

Abstract

This study aims to examine the influence of corporate governance variables on firm performance and also to find out whether the corporate governance mechanism is capable of mitigating the vertical agency crisis. Here the researcher uses corporate governance mechanisms such as board meeting frequency, board independence, percentage of non-executive directors, percentage of woman directors on board and the board size to measure the firm performance and, at the same time, tries to mitigate the agency crisis, which is measured through return on asset and asset turnover ratio.Design/methodology/approachThe present study considers period from 2009 to 2020 with data corresponding to a panel of 271 non-financial firms listed in 500 NSE index, India. The study introduces a panel regression model to analyze the data collected from the sample firms.FindingsThe study detects a positive as well as a statistically significant relationship between board size and vertical agency cost. The study also observes a negative relationship between board independence and agency cost. Further, the study finds a positive relationship between corporate governance variables and firm performance, though it is non-significant.Originality/valueAs the study progresses, the study detects a negative relationship between non-executive directors and agency costs. This study tries to give policy prescription to the corporate policymaker regarding various measures to be taken by the firm for the improvement of firm performance and reduction of owner and manager conflict inside the company. The study fills the literature gap by revealing a significant relationship between corporate governance, vertical agency crisis and firm performance.

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References (49)

Publisher
Emerald Publishing
Copyright
© Premananda Sethi, Tarak Nath Sahu and Sudarshan Maity
ISSN
2615-9821
eISSN
2633-7991
DOI
10.1108/ajeb-01-2022-0003
Publisher site
See Article on Publisher Site

Abstract

This study aims to examine the influence of corporate governance variables on firm performance and also to find out whether the corporate governance mechanism is capable of mitigating the vertical agency crisis. Here the researcher uses corporate governance mechanisms such as board meeting frequency, board independence, percentage of non-executive directors, percentage of woman directors on board and the board size to measure the firm performance and, at the same time, tries to mitigate the agency crisis, which is measured through return on asset and asset turnover ratio.Design/methodology/approachThe present study considers period from 2009 to 2020 with data corresponding to a panel of 271 non-financial firms listed in 500 NSE index, India. The study introduces a panel regression model to analyze the data collected from the sample firms.FindingsThe study detects a positive as well as a statistically significant relationship between board size and vertical agency cost. The study also observes a negative relationship between board independence and agency cost. Further, the study finds a positive relationship between corporate governance variables and firm performance, though it is non-significant.Originality/valueAs the study progresses, the study detects a negative relationship between non-executive directors and agency costs. This study tries to give policy prescription to the corporate policymaker regarding various measures to be taken by the firm for the improvement of firm performance and reduction of owner and manager conflict inside the company. The study fills the literature gap by revealing a significant relationship between corporate governance, vertical agency crisis and firm performance.

Journal

Asian Journal of Economics and BankingEmerald Publishing

Published: Mar 24, 2023

Keywords: Corporate governance; Firm performance; Vertical agency crisis

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