Relationship between corporate governance and firm performance
Ram Ranjan Routh
Good governance generates investors goodwill and confidence. Better corporate framework benefits firms through greater access to financing, lower cost of capital, better firm performance and more favourable treatment of all stakeholders. But poorly governed firms are expected to be less profitable. So, Corporate Governance is an important factor in determination of firm performance. The purpose of this study is to investigate the impact of Corporate Governance on the performance of the selected Indian listed companies by constructing Corporate Governance Index (CGI). Multiple regression is used covering the 2010–2019 period. The study shows that the growth rate of the CGI and the five sub-indexes show significant rising trend. The audit committee governance index represents the highest score compared to other index and followed by nomination & remuneration committee governance index, disclosure & transparency governance index and shareholder rights governance index. The study also found a positive relationship between firm performance and corporate governance index. Finally, it can be concluded that this study supports the stakeholder theory in the India. The corporate governance code in the India is established based on principles of corporate governance, which require good corporate governance practice providing to the interests of all stakeholders.