Corporate Governance and Performance of Foreign Firms in India

Abstract

This article examined the issues related to corporate governance in foreign firms working in India. The three questions examined are: What is the nature of corporate governance in terms of board size, independence and quality of its functioning or its effectiveness? Does board independence and size of the board show difference in compliance with corporate governance? What is the relationship between corporate governance and firms’ performance? These three questions are examined with reference to board size, board composition, board independence, conduct of the board and its committees. The data relate to the period from 2005–2006 to 2011–2012 for 42 foreign firms listed in the National Stock Exchange (NSE). The analysis is based on compliance of the firms with corporate governance mandatory requirements. The degree of compliance with corporate governance is fairly good. Majority of the firms fulfilled the mandatory requirements in all sub-indices of the clause.