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Relationship between the board of directors and financial performance: Empirical Anecdote

Author

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  • Niyati Chaudhary

    (SGT University, Haryana, India)

  • Akshita Arora

    (Apeejay School of Management, New Delhi, India)

Abstract

The agency issues between shareholders and management push corporate governance issues into limelight. Our study's objective is to examine the consequences of board characteristics on a firm’s financial performance. Board size, independent directors, CEO-duality, number of independent directors in the audit committee, promoter’s shareholding, and board meetings have been chosen as the board variables. The fixed effects method has been applied to investigate the effect of board variables on company’s performance using a panel data framework. This study demonstrates that board of directors has an impact on firm performance and the independent directors are necessary for the audit committee to improve performance. They indicate indirectly that the automobile sector has a chance to improve firm performance by strengthening the governance system with a well-balanced board composition. Additionally, audit committee with high number of independent directors ensures independent judgment and oversight during the audit of financial statements.

Suggested Citation

  • Niyati Chaudhary & Akshita Arora, 2023. "Relationship between the board of directors and financial performance: Empirical Anecdote," Acta Universitatis Bohemiae Meridionales, University of South Bohemia in Ceske Budejovice, vol. 26(3), pages 13-32.
    • Handle: RePEc:boh:actaub:v:26:y:2023:i:3:p:13-32
    DOI: 10.32725/acta.2023.014
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    Keywords

    Corporate governance; firm performance; automobile sector; fixed-effects;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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