Board of Director's Role in Enhancing Financial Performance of the Indian Nifty 50 Listed Companies (original) (raw)

Abstract

Purposeapplying a set of data Nifty 50 listed companies in India; this research paper is an attempt to empirically evaluate the effects financial performance of board of director's based on their characteristics. Design/methodology/approacha sample size of 50 listed firms have been used, from the year 2008 to 2016. Time series and cross sectional are the basic features on which the entire study is based upon for panel estimation. Beside it, statistical measures like ordinary least squares (OLS) model of regression and robust regression is applied to mitigate the problems related to endogeneity. Findings-The primary results shows that for financial performance measuring by ROA, ROE, ROCE, board of director's features has positive and relevant effect on financial decision and performance of the firms in our study on Indian Nifty 50 listed firms. The results also points out that in the perspective of nifty 50 listed firms, the leverage and firm size are negatively related with the financial performance of the firms. Limitations and implications of the Research-In accordance with the Indian corporate governance norms and reforms, it is obligatory for the listed companies to appoint independent directors system, by far is successful still, the regulatory and governing authorities should efficiently implement the norms of appointment of independent directors in listed companies to improve corporate governance system in India. Originality/value-Initially, in not similar fashion with the prior studies based on the developing nations, this present study interrogates the impact of features of board of directors on financial performance of Indian Nifty 50 listed firms. Thereafter, while a lot many studies applied a solitary indicator of firm financial performance, this study examines ROA, ROE and ROCE. Using the OLS estimation the present study emphasizes the endogeneity issue between firm performance and board of director's characteristics, and robust regression for mitigating the exactness of using OLS estimation.

Figures (7)

From the above context, research problem is clear and that objective is to study the impact of board effectiveness policy on the financial performance of the firmfinancial performance of NIFTY 50 traded companies, therefore, necessary stepswill be taken to provide a clear picture for indexing board of directors. It is significant to enquire the relevant question the impact of composition of boards of directors on NIFTY 50 firm’s financial performance? Recent research work has answered this question by showing the impact of board of directors in different countries. Further, with a shortage of empirical studies on the impact of board of directors on many aspects of the Indian economy; academic research has not yet studied the impact of composition ofboard effectiveness on the financial appraisal of NIFTY 50 listed firms in India. A lot was said about financial performance of NIFTY 50 traded firms based on the board of directors

From the above context, research problem is clear and that objective is to study the impact of board effectiveness policy on the financial performance of the firmfinancial performance of NIFTY 50 traded companies, therefore, necessary stepswill be taken to provide a clear picture for indexing board of directors. It is significant to enquire the relevant question the impact of composition of boards of directors on NIFTY 50 firm’s financial performance? Recent research work has answered this question by showing the impact of board of directors in different countries. Further, with a shortage of empirical studies on the impact of board of directors on many aspects of the Indian economy; academic research has not yet studied the impact of composition ofboard effectiveness on the financial appraisal of NIFTY 50 listed firms in India. A lot was said about financial performance of NIFTY 50 traded firms based on the board of directors

Table 1: Number and Percentage of sample firms by industry *Moneycontrol is India's leading financial information source. See https://www.moneyworks4me.com

Table 1: Number and Percentage of sample firms by industry *Moneycontrol is India's leading financial information source. See https://www.moneyworks4me.com

Te INCSUILS UL TIUUCL CSUTMAUULL Table 4 draws conclusion of regression estimationof firm financial performance on_ boar characteristics, and control variables. The regression results in Columns 1, 2 and 3 depend upo accounting measures for ROA, ROE and ROCE, respectively. The board characteristics variable the coefficient of BDC is positively and statistically significant at the 1% significance level for ROA ROE and ROCE. The conclusion favors the hypotheses of the study (Hol, Ho2, Ho3) and are simil: with those of (Kao et al., 2019; Mohd Nor et al., 2014; Wang, 2013), suggesting that boar characteristics variables does enhance firm financial and overall performance. The hypotheses hav been accepted as the coefficient of TIER is associated positively and significantly with ROA, RO and ROCE at the 1 % level. Table 4 depicts that the coefficient value of leverage is negative an insignificant for all ROA, ROE and RCOE. The result is consistent with (Doan & Neguyet 2018).Moreover, the coefficient of Firm size is also negative and significant at the 1% level for bot ROE and ROCE, These results are consistent with those of (Guest, 2009; Wang, 2013). Table 3: Correlation Matrix and Multicollinearity Diagnostics “Romie NOUR EUCRAULULL GAILU BELURULCUEIEEIV GL ILY Ula SUL Table 3 explains the Pearson correlation matrix and multicollinearity diagnostics for differen dependent and causal variables. The coefficients are based on the data from 50 Nifty Indian liste firms with 400 observations for the period 2008/09—2015/16. Results reveal the positive relationshy of board of director’s characteristicswith financial performance. This indicates that if the companie follow the rules of board of director’s characteristics, the financial performance of the companies ar going to increase. Similarly, the result also shows a positive relationship between firm leverage an financial performance measured by ROA, ROE, and ROCE, which means that if there is increase 1 everageit leads to an increase in profitability. The result also shows a positive relationship of boar of director’s characteristicswith leverage and firm size. This reveals that board of director’ characteristicsleads to increase in leverage and firm sizewhereas board of director’ characteristicshas a negative associations with financial performance measured by ROA, ROE, an ROCE.

Te INCSUILS UL TIUUCL CSUTMAUULL Table 4 draws conclusion of regression estimationof firm financial performance on_ boar characteristics, and control variables. The regression results in Columns 1, 2 and 3 depend upo accounting measures for ROA, ROE and ROCE, respectively. The board characteristics variable the coefficient of BDC is positively and statistically significant at the 1% significance level for ROA ROE and ROCE. The conclusion favors the hypotheses of the study (Hol, Ho2, Ho3) and are simil: with those of (Kao et al., 2019; Mohd Nor et al., 2014; Wang, 2013), suggesting that boar characteristics variables does enhance firm financial and overall performance. The hypotheses hav been accepted as the coefficient of TIER is associated positively and significantly with ROA, RO and ROCE at the 1 % level. Table 4 depicts that the coefficient value of leverage is negative an insignificant for all ROA, ROE and RCOE. The result is consistent with (Doan & Neguyet 2018).Moreover, the coefficient of Firm size is also negative and significant at the 1% level for bot ROE and ROCE, These results are consistent with those of (Guest, 2009; Wang, 2013). Table 3: Correlation Matrix and Multicollinearity Diagnostics “Romie NOUR EUCRAULULL GAILU BELURULCUEIEEIV GL ILY Ula SUL Table 3 explains the Pearson correlation matrix and multicollinearity diagnostics for differen dependent and causal variables. The coefficients are based on the data from 50 Nifty Indian liste firms with 400 observations for the period 2008/09—2015/16. Results reveal the positive relationshy of board of director’s characteristicswith financial performance. This indicates that if the companie follow the rules of board of director’s characteristics, the financial performance of the companies ar going to increase. Similarly, the result also shows a positive relationship between firm leverage an financial performance measured by ROA, ROE, and ROCE, which means that if there is increase 1 everageit leads to an increase in profitability. The result also shows a positive relationship of boar of director’s characteristicswith leverage and firm size. This reveals that board of director’ characteristicsleads to increase in leverage and firm sizewhereas board of director’ characteristicshas a negative associations with financial performance measured by ROA, ROE, an ROCE.

Table: 4 Regression Results Estimation 4.4 Robust Regression > The panel regression outcome may face the issues related to endogeneity. In this research study, endogeneity of board of director’s characteristics through firm financial performance would entail that the panel regression estimates, are significantly biased and incoherent, and soit cannot applied to draw conclusions about the causality of the association. So, we go for applying the robust regression to tackle the endogeneity issue. The equation is applied to carry out the robust regression is the same as equation (1). However, robust regression estimation may not convey better estimates in comparison to panel estimation.

Table: 4 Regression Results Estimation 4.4 Robust Regression > The panel regression outcome may face the issues related to endogeneity. In this research study, endogeneity of board of director’s characteristics through firm financial performance would entail that the panel regression estimates, are significantly biased and incoherent, and soit cannot applied to draw conclusions about the causality of the association. So, we go for applying the robust regression to tackle the endogeneity issue. The equation is applied to carry out the robust regression is the same as equation (1). However, robust regression estimation may not convey better estimates in comparison to panel estimation.

Table 5. Robust Regression International Research Journal of Management Science & Technology httn: / /wranay i1rimet cnm

Table 5. Robust Regression International Research Journal of Management Science & Technology httn: / /wranay i1rimet cnm

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