-P. Suganthi & S.

Brinda Devi,
V.V.VANNIAPERUMAL COLLEGE FOR WOMEN

Corporate Governance
A framework providing guidelines to the management

about governing responsibly It is about commitment to values, about ethical business conduct It covers:
Adequate disclosures and effective decision making to achieve

corporate objectives; Transparency in business transactions; Statutory and legal compliances; Protection of shareholder interests; Commitment to values and ethical conduct of business

Objectives of the Study

Is there any relationship between the size and the firm

value in top performing companies Is there any relationship between the independence of the Board and the firm value in top performing companies

Hypothesis of the study

H1: There is a significant relationship between firm performance and Board Size in top performing companies H2: There is a significant relationship between firm performance and Board Independence in top performing companies

Research Methodology
Sample period: 2010 2013, i.e. 4 years. Sample: Each company from 10 industries constituting

BSE SENSEX. Banking sector is ignored and one another company is ignored for non availability of data. Hence, 8 companies with 4-year data are taken for study Source of data: Secondary data from the annual reports of the selected companies for the four year sample period 2010-13.

Variables Used
Dependent Variables: Firm Value: Measured by a proxy for Tobins Q ratio and Return on Equity.

Tobins Q is defined as the ratio of market value of equity and market value of debt to the replacement cost of assets. Tobin Q =

Market Value of Equity+Book Value of Total Liabilities Book Value of Total Assets Profit After Tax Return on Equity = Shareholders funds+Retained earnings

Independent Variables:
Board Size- Number of Directors in the Board Board independence
Number of Independent Directors Ratio Total Number of Directors

Control Variables:
Firm size Natural log of sales of the companies for the given sample period Age of firm Difference between 2010 and year of incorporation
Long term debt Total laibilities + Equity + Retained earnings Net Fixed assets Total Assets

Financial Leverage
Asset Tangibility

Tools used: Correlation Hierarchical Multiple regression to study the effect of control variables and the independent variables on firm value. Results are calculated with SPSS package.

Results and Discussions

Correlation: There is a negative correlation between Tobin Q and Board size. All other correlations are significant among the variables, but the coefficient of correlation does not exceed 0.6 mostly (exception: 0.77 between ROE and Age, 0.66 between No. of Board of Directors and asset Tangibility).

 Regression: Board Independence:

90% significance with Tobin Q Significant relationship between financial leverage and Asset Tangibility. Insignificant impact on ROE Significant impact on ROE, but positive relationship is exhibited contrary to previous studies Insignificant with Tobin Q

Board Size:

Possible explanation
Small sample size of companies from different sectors

bouncing back with their best and efficient performance after the blow of recession, and the sample period chosen as the period immediately after crisis - a possible reason for insignificant relationship exhibited Significant relationships shown between financial leverage, asset tangibility ratio and the age and dependent variables, indicating financial soundness and experience Factors other than Board size and its independence have assumed greater significance in determining the firm value, especially given that the period of study immediate after the financial crisis

CONCLUSION
Board size and composition did not have any significant

impact on the firm value for the selected sample of 8 companies and the period of 4 yrs from 2010 to 2013 To conclude, maintaining that corporate governance practices are in vogue in the sample companies, certain other factors have had dominant role in determining firm value.