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A Corporate governance index for large listed companies in India

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  • Jayati Sarkar

    ()
    (Indira Gandhi Institute of Development Research)

  • Subrata Sarkar

    ()
    (Indira Gandhi Institute of Development Research)

  • Kaustav Sen

    ()
    (Indian Institute of Management)

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    Abstract

    We construct a Corporate Governance Index for 500 large listed Indian firms for the period from 2003 to 2008 in this paper. The index construction uses information on four important corporate governance mechanisms: the board of directors, the ownership structure, the audit committee, and the external auditor. The construction of the index for six years allows an examination of the evolution of corporate governance in India in a period when there have been a large number of corporate governance reforms. The analysis documents a rising trend in the level of the Corporate Governance Index of Indian companies. There is a strong association between the Corporate Governance Index and the market performance of companies, where companies with better corporate governance structures earn substantially higher rates of return in the market. This analysis shows that Indian markets tend to reward companies that carry out governance reforms. It provides an impetus to regulators as well as to push for further reforms.

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    Bibliographic Info

    Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2012-009.

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    Length: 36 pages
    Date of creation: Mar 2012
    Date of revision:
    Handle: RePEc:ind:igiwpp:2012-009

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    Related research

    Keywords: Corporate Governance Index; board of directors; ownership structure; audit committee; external auditors;

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