Abstract:

Although the compositions of corporate boards have undergone dramatic changes in the last two decades, many firms continue to appoint insiders on corporate boards. We find that the proportion of executive directors is significantly correlated with firm profitability, valuation and risk taking in a sample of Indian firms. We observe this result only in highly competitive industries and when the founding family shareholding is high. Adding inside directors does not have an impact on profitability or risk when firm complexity is more. The performance effects are observable after an improvement in the broader governance environment and before the COVID 19 pandemic.Although the compositions of corporate boards have undergone dramatic changes in the last two decades, many firms continue to appoint insiders on corporate boards. We find that the proportion of executive directors is significantly correlated with firm profitability, valuation and risk taking in a sample of Indian firms. We observe this result only in highly competitive industries and when the founding family shareholding is high. Adding inside directors does not have an impact on profitability or risk when firm complexity is more. The performance effects are observable after an improvement in the broader governance environment and before the COVID 19 pandemic.

Please choose your submission type: Full Paper

Primary Track: Corporate Governance

Keywords: Ownership and Board Structure ;Boards of Directors and Top Management Teams

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Ms. Sonal Chaudhary