Corporate Governance and Performance of Indian Companies The Effect of Board Size and Ownership Structure

Abstract

During the recent years, the glut of scams and debacles in the US, UK, Canada, and newlineeven India led to the collapse of many companies which lost the confidence of investors newlineespecially foreign investors in the Indian companies. Corporate governance gained ground after newlinethe liberalization and globalization. It has brought a massive change in the Indian market. newlineKeeping in line with the developed countries, India also made its first step towards corporate newlinegovernance by introducing Clause 49 of the Listing agreement in 2001. Even after its initiation, newlinestill, corporate misdeeds continue to shoot the country after every few months, each time in a newlinedifferent way. It holds that strong laws and strict regulation do not offer a complete solution to newlinecorporate governance issues. Thus, there is a need to focus on creating incentives for the board newlineas well as management to focus on the objectives that are beneficial to shareholders. The newlinesituation got worse when the global financial deadlock eroded almost half of the capital invested newlineby the shareholders, and the market capitalization came down from the US$62 trillion at the end newlineof 2007 to the US$29 trillion by the end of October 2009 (Clarke, 2010).To cope up with these newlineissues, there is a desperate need to study Corporate Governance and make significant changes in newlinethe governance structure of the companies. In order to cope up with these issues various internal newlineas well as external mechanisms have been suggested. The study has focussed on two Internal newlinemechanisms i.e. board size and ownership structure. Numerous studies have investigated the newlineimpact of board size and ownership structure on the performance of the companies but the results newlineare contradictory. It could be because of the different performance parameters chosen, different newlineperiod and tools used in these studies.Most of the Indian studies evolves either around the period newlineof Financial Deadlock, i.e., 2008 or at the time of Companies Act 2013 or at the time of the newlineintroduction of clause 49 in 2001. newline