Relationship between Corporate Governance and Value Based Financial Performance Measures: Evidence from India

Title

Relationship between Corporate Governance and Value Based Financial Performance Measures: Evidence from India

Creator

Gupta Preeti

Description

The concept of corporate governance is gaining momentum because of changing business environment and various other factors as well as. The EEC, GATT and WTO regulations have also contributed to raise the awareness and are compelling us to think in terms of adhering to the good governance practices. In recent years, value-added relationship between management and stakeholders is considered a requirement for corporate success. The performance measures of corporations have been transformed and value-based financial performance measures like Economic value added (EVA), Market value added (MVA) has been developed.Empirical studies in corporate governance focus on the link between corporate governance and firms performance. There are limited number of studies using performance measures such as EVA and MVA, etc. hence the current study is based on relationship between corporate governance and value based financial performance measures like EVA and MVA, the study focuses on Information technology sector in India. Independent Variables included in the study were CEO Duality, Size of the Board, Management Equity Ownership, Foreign Ownership, Number of Board Meetings, Leverage ratio andSize of the firm. LLC t-test and the IPS w-test were conducted to check the stationarity of series and results are analyzed by multiple panel regression models. Results indicate that EVA, MVA has significant relationship with Corporate Governance variables. SOTB has significant negative relationship with MVA, CEO Duality has positive relationship with the Market value added (MVA) of the firms, the study further indicates there is a significant relationship between Size of the firm and EVA and as the Firm size increases EVA is also increased for the firms. However foreign ownership is found to increase the performance in terms of MVA. Manager ownership is not found to be an important variable in increasing corporate performance with the context of value based management. The study concluded that corporate governance has significance influence on the financial performance of the Information technology firms in India. Keywords: Corporate Governance, EVA, MVA, Correlation, Panel Unit Root.

Source

Management

Date

2013