Governing Hybrid organizations at the Interface

of Business & Government- The Case of PSEs

Sandeep E
M180014MS
 Introduction

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 Closely related literature & Gaps
Sl No Researcher (Year) Contribution Comment/
Limitations
1. Ritika Jain (2017) The study finds that the Analysis is done for
probability and quality of the year ‘2010-11’
corporate governance is positively only
influenced by the CPSE signing a
Memorandum of Understanding
(MoU) with the central
government of India, and hence,
enjoying more autonomy in terms
of day to day operations. Further,
larger firms with lower debt
size contribute significantly to
better corporate governance

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 Research Objectives

• To study the linkage between Corporate

Governance practices and performance
outcomes in Public sector Enterprises
• To analyze the difference in corporate
governance mechanisms of PSUs and their
private sector counterparts

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 Hypothesis/ Model (1/2)
Board Size

Independent
Directors

Board Firm Income PBIT

Meetings

R&D
Expenditure

Women on
Board

Age of
directors
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 Hypothesis/ Model (2/2)
• Hypothesis 1 : There is a strong
positive relationship between the
number of Independent directors
on the board & the financial
performance of the PSE measured
by PBIT
• Hypothesis 2: There is a strong
positive relationship between the
number of meetings conducted in a
year & the financial performance of
the PSE measured by PBIT
• Hypothesis 3: There is a strong
positive relationship between the R
& D expenditure by the PSE & the
financial performance of the PSE
measured by PBIT
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• Hypothesis 4 : There is a strong
positive relationship between the
number of women directors on the
board & the financial performance
of the PSE measured by PBIT
• Hypothesis 5: There is a strong
positive relationship between the
age of the directors & the financial
performance of the PSE measured
by PBIT
• Hypothesis 6: There is a strong
negative relationship between the
Board size & the financial
performance of the PSE measured
by PBIT
6
 Method (1/2)
• The analysis was done on listed Public sector Enterprises
(42 of the PSEs are listed in the stock exchange)
• Measurement was done for a 5 year period (2013-2017)
• Data was collected from
– Financial statements & survey reports of PSEs from
Department of Public Enterprises website
– BSE & NSE websites
– CMIE PROWESS
• Panel fixed effects OLS regression with robust standard
error is performed using STATA13

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 Method (2/2)
• The corporate governance practices of five
listed PSUs were compared with their
comparable private sector peers.
Category Industry PSU Private Sector
Maharatna Steel Steel Authority of India Ltd (SAIL) Tata Steel Ltd
Power NTPC Ltd Reliance
Infrastructure Ltd
Navaratna Shipping Shipping Corporation of India Ltd Great Eastern
(SCI) Shipping Co Ltd (GE
Ship)
Telecom Mahanagar Telephone Nigam Ltd Bharati Airtel Ltd
(MTNL)
Miniratna Chemicals & Rashtriya Chemicals & Fertilizers Ltd Coramondel
Fertilizers International Ltd

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 Data Analysis- I (1/2)

DESCRIPTIVE STATISTICS

Board Age of R&D Independent Women on Board Firm

Stats PBIT Meetings Directors Expenditure Directors Board size Income

N 183 183 183 183 183 183 183183

Mean 725.7241 8.240437 56.6612 9.712897 2.9234 0.677596 9.185792 5503.735

SD 1415.339 3.572961 3.180465 22.06397 2.400697 0.703125 3.591568 13911.67

Min -743.235 0 49 0 0 1 3 0.1001

Max 7985.174 18 64 113.873 10 2 18 89153.24

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 Data Analysis- I (2/2)
Variables Reg1 Reg2 Reg3 Reg4 Reg5 Reg6

  coef/se coef/se coef/se coef/se coef/se coef/se

Board Meeting 142.698***          
  (10.586)          
Age of Directors   9.330**        
    (3.278)        
R & D expenditure     22.738**      
      (7.075)      
Independent Directors       95.421**    
        (33.347)    
Women on Board         -274.061***  
          (49.601)  
Board Size           55.237**
            (15.501)
Firm Income 0.044*** 0.045*** 0.035** 0.045*** 0.048*** 0.044***
  (0.008) (0.008) (0.010) (0.009) (0.008) (0.009)
Number of observations 183 183 147 183 183 183
Adjusted R2 0.389 0.377 0.401 0.422 0.415 0.378
note: .01 - ***; .05 - **; .1 - *;            
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 Result and Interpretation

• Factors which effect the financial performance

of a listed Public Sector Enterprise are
– Women on Board (Negative relationship)
– The number of Board Meetings held
– R & D Expenditure
– The number of Independent Directors in the board
– Age of Directors

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 Data Analysis- II
Sl Company Status of Chairman-CEO Total no. No.of No.of Non Independent Percentage of
No Chairman Duality of Executive Executive Directors Independent
. Directors Directors Directors (No) Directors

1. RCFL Executive Yes 6 4 2 0 0

2. CIL Non No 8 1 3 4 50
Executive,
Promoter

3. NTPC Executive Yes 17 7 2 8 47

4. R Infra Non No 6 0 3 3 50
Executive,
Promoter

5. SCI Executive Yes 15 5 2 8 53

6. GE Ship Executive No 9 3 1 5 63

7. SAIL Executive Yes 17 6 2 9 53

8. Tata Steel Non exe, No 13 2 4 7 53

promoter
9. MTNL Executive Yes 6 3 2 1 16

10 Airtel Non exe, No 13 3 3 7 54

promoter

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 Result and Interpretation

• PSUs possess Chairman-CEO duality in their

board
• The board size of PSUs are bigger than their
private sector peers
• PSUs face a problem of not having enough
Independent directors
• All independent directors in the boards of PSU
are retired Government officials

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 Business Implications

• The role of Corporate Governance in

determining the firm outcomes in PSEs
• Are the CG mechanisms same for PSEs &
Private sector firms?

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 Conclusion

• Initially this study focussed on the CG factors

which influence the performance of the PSU
• Then a comparison was made by selecting 5 PSUs
and resembling Private firms
• The study provides evidence that CG problems in
listed PSUs are different from the private sector
• This study will be helpful for future research
where CG principles & mechanisms are
considered in improving firm performance

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 Major References
• Young M.N., Peng M.W., Ahlstrom D., Bruton G.D., Jing Y. 2008.
Corporate governance in emerging economies: a review of principal-
principal perspective. Journal of Management Studies, 45,196-220
• Public Enterprises Survey ,2011-18
• Government of India (2010), Guidelines on Corporate Governance for
Central Public Sector Enterprises, May 2010
• Government of India(2012-18), Annual Report of Ministry of Heavy
Industries and Public Sector Enterprises(2012-18)
• Sharat Kumar, “Model MoU for State Level Public Enterprises” in the
Proceedings of Conference of Secretaries of States and Union Territories
on State Level Public Enterprises
• KPMG(2011), Public Sector Enterprises-Transformation, Competitiveness
and Sustainability

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