CIA 1

RESEARCH
METHADOLOGY
Research Proposal on Corporate Governance

SUBMITTED BY:
SALONI JAIN 1820343 3-BBA-C
SARAH AFREEN 1820376 3-BBA-C
DEV ARORA 1820309 3-BBA-C
DHEER THAKKAR 1820310 3-BBA-C
GARV SAVLANI 1820311 3-BBA-C
TITLE: CORPORATE GOVERNANCE AND ITS IMPACT ON FINANCIAL
PERFORMANCE OF CORPORATE FIRMS

SUMMARY:

The analysis of the study presents a picture of practices of corporate governance in different
enterprises . The study also presents an analysis of the impact of corporate governance on the
financial performance of different companies in different sectors. The study also states the
evolution of corporate governance in India and the major challenges faced in regulating its
norms. The major challenges faced by Corporate governance was the role of ethics and values in
business. Transparency about a company’s financial position was critical but instilling the right
culture was more important. The study presents that the degree of Corporate Governance
disclosure in different companies. The study will not only defend the voluntary disclosure of
Corporate Governance but also its connection with the financial performance and taking the
interest of all stake holders.
The study tries to see whether higher and better corporate governance leads to better
performance of the companies. Various parameters such as Board Constitution, Board Structure,
Different Committees, Independent Directors and their roles, Conflict of interest and Disclosure
of information has been taken into account to analyze the impact.

It is found that corporate governance practices have limited impact on both the share prices of
the companies as well as their financial performance. It should not be seen in isolation of other
factors affecting the share prices and the financial performance. In all industries irrespective of
sector all companies practice some sort of corporate governance at least as said in their annual
reports due to mandatory requirements. The primary driver mentioned behind the corporate
governance practices is the interest of the stakeholders. The study expresses that there is a
positive relationship of composition of board (COB) and board committee (BC) with return on
assets (ROA) and return on capital employed (ROCE) both interchangeably.

Withal, all the companies are practicing exceptional corporate governance practices, but in order
to keep up the interest of stakeholders and firm’s performance, SEBI should adopt more binding
steps to avoid any kind of fraud and facilitate fair trading in the stock market.
LITERATURE REVIEW:

Agency theory (Jensen and Meckling 1979) suggests that management (agent) is hired by
shareholders (principals) to run the firm on the daily basis. Two parties, potentially, can have a
conflicting interest in a contract. Corporate governance addresses the contract via the board of
directors. Prior studies have investigated the impact of the corporate governance policy on the
firm’s value. In probably the first research of its kind, Carter et al. (2003), in a study of1, 000
Fortune firms, find significant evidence of a positive relationship between board diversity, and
firm value, measured by Tobin’s Q (Chung & Pruitt 1994). The International Journal of Creative
Research Thoughts also suggest that disclosure, transparency and accountability are important
aspect for good governance and timely and accurate information should be disclosed on the
matters like the financial position, performance in order to have a financial advantage
(Chakrabarti, R. 2005). In “Corporate governance in India: study of the top 100 firms” Pillania,
Rajesh k. has found that the main advantage of corporate governance is the competitive
advantage or building the brand reputation which interns improves the cash inflow into the
organisation (Pillania, Rajesh k. 2012). In comparison of the Indian economy and other Asian
companies Gupta, P., & Sharma, A.M found that Indian companies follow more stringent
corporate governance practices as compared to other Asian countries which ensures its financial
advantage over its Asian competitors (Gupta, P., & Sharma, A.M. 2014). Studying various
industries in the Indian economy, Amity Journal of Corporate Governance suggests that there
exists a relationship and identifies a significant implication of COB on financial performance of
selected IT companies (Prusty, T., & Kumar, S. 2016). In addition to this, International Journal
of Management Research ad Review observes a positive relationship between the EBT/Sales
ratio and corporate governance score of selected Indian companies (Soti, P., & Gupta, Sachindra
k. 2013). Majority of the prior studies have documented that quality corporate governance
protects the shareholders and enhances the firm’s value. This paper is designed to investigate the
relationship between corporate governance policy and corporate financial performance in the
Indian manufacturing sector.
RESEARCH GAP:
a) This study lacks the contribution to the literature by examining firm-specific factors that
influenced the performance of Indian firms from the view point of their corporate
governance choices.
b) The study also lacks the understanding of Indian firms’ corporate governance choices and
how it affects their corporate performance.
c) The study also lacks the insights on impact of proper corporate governance in major
sectors of India.

RESEARCH OBJECTIVES:

 To examine the impact of corporate governance on firm’s profitability.

 To what extent do the different parts of corporate governance such as dual role of CEO,
board independence and board size have an impact on firm performance measured by
ROA and ROE.
 To analyse the relation between corporate governance reforms and firm performance in
the Indian secondary sector.
 To provide literature review on the relationship between corporate governance and
corporate financial performance.

PROPOSED DATA COLLTECTED METHOD:

For the purpose of the research and in order to achieve the objectives, we have used secondary
method of data collection.

The sources of secondary data are –

 Website, Annual Reports and Published Reports of Companies.

 Different new articles and books were used which were enumerated and recorded.
 Various journal and research papers has been referred and studied.
CONCLUSION:
The study will help in finding out the relationship between proper corporate governance and
corporate performance of different sectors in India. The research will not only fill the research
gap in the area but will also help organizations operating in India’s major sectors to decide
whether to implement strategized corporate governance policies in order to maximize their profit
and improve their overall operational information. The study also aims at studying the extent of
impact it creates on the companies operating in the sector and the financial benefits it will
provide on it proper implementation in the corporates. Moreover, the study will also help
foreign investors to observe current policies and corporate performance of the companies in the
Indian major sector and invest accordingly. Altogether it will fill the knowledge void with
relation to corporate governance in the major sector in India and will help other researchers
studying the topics with better insights to the topic and its implications.
REFERENCES:

1) Chakrabarti, R.,(2005). Corporate Governance in India - Evolution and Challenges. The

International Journal of creative research thoughts, 6, 52-68.
2) Gupta, P., & Sharma, A.M.(2014). A Study of the Impact of Corporate Governance
Practices on Firm Performance in Indian and South Korean Companies. Symbiosis
Institute of Business Management, 133 ,4-11
3) Maheshwari, M.,(2018). Corporate governance practices in indian corporate it sector
included in bse sensex: a comparative study. Indian Journal of Accounting, 50(1), 13-20
4) Pillania, Rajesh k. (2012). Corporate governance in India: Study of the top 100 firms.
Journal of Applied Economic Sciences, 7, 87-93
5) Prusty, T., & Kumar, S.(2016). Effectivity of Corporate Governance on Financial
Performance of IT Companies in India with Special Reference to Corporate Board. Amity
Journal of Corporate Governance, 1(1), 15-33
6) Soti, P., & Gupta, Sachindra k. (2013). - Impact of corporate governance on the financial
performance of Indian IT companies listed on stock exchanges. International Journal of
Management Research ad Review, 3, 2636-2647