Testing the demand for monitoring and advisory roles of independent directors: a case of Indian corporate boards

Research on Indian corporate governance has been largely relied on the monitoring role of corporate boards and thus, is devoid of another important role, i.e., advisory role performed by them. The present analysis makes an endeavour to fill the research gap of testing simultaneously the relevance of monitoring and advisory roles of corporate boards by specifically focusing on investigating the linkages between several firm specific factors (firm complexity, monitoring and advising costs, private benefits, CEO influence) and board independence. Overall the analysis maintains that board independence is significantly determined by the level of firm complexity and private benefits in the directions consistent with the past literature. However, the findings of monitoring and advising costs, and CEO influence hypotheses are opposite to the expectations derived from the concerned literature. These variations can be attributed to unique environment and different institutional contexts under which the firms are operated.