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Article . 2025
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An Empirical Analysis of the Impact of Corporate Governance on Firm Performance in India

Authors: Dr. Nilesh Narayan Prasad;

An Empirical Analysis of the Impact of Corporate Governance on Firm Performance in India

Abstract

This study examines the impact of corporate governance mechanisms on firm performance in India, focusing on board size, board independence, and CEO duality. Using a sample of 100 companies listed on the Bombay Stock Exchange (BSE), the research employs regression analysis to analyze the relationship between governance practices and financial performance metrics such as return on assets (ROA) and return on equity (ROE). The findings reveal that board size and board independence positively influence firm performance, as larger and more independent boards enhance oversight, reduce conflicts of interest, and improve decision-making. Conversely, CEO duality, where the CEO also serves as the board chair, negatively impacts performance by concentrating power and reducing board accountability. The study highlights the importance of robust governance frameworks in fostering transparency, accountability, and ethical conduct. Independent directors play a critical role in aligning management decisions with shareholder interests, while effective audit committees and balanced ownership structures further strengthen governance. Institutional ownership is positively correlated with performance, whereas promoter ownership can lead to conflicts of interest in family-owned businesses. These findings have significant implications for policymakers, regulators, and investors. Policymakers are encouraged to promote governance standards that emphasize board independence, optimal board size, and the separation of CEO and chairperson roles. Regulators can enhance market integrity by enforcing compliance with governance best practices. Investors, particularly institutional ones, can use governance metrics to assess companies and advocate for reforms that align with long-term value creation. In conclusion, this study underscores the critical role of corporate governance in driving firm performance and sustainable growth in India. By adopting effective governance practices, companies can mitigate risks, improve decision-making, and build investor trust, contributing to both organizational success and broader economic development. Future research could explore the impact of emerging trends, such as environmental, social, and governance (ESG) factors, on corporate governance and firm performance.

Keywords

Corporate Governance, Firm Performance, Bombay Stock Exchange

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citations
The total number of citations received by all articles of the researcher of interest.
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
Green