Corporate governance structures play a vital role in enhancing the firm value. This paper examines the effect of two important corporate governance variables board size and promoter ownership on the firm value. The research using linear regression analysis on 176 non-financial listed companies for year 2008 finds a negative association of Tobin Q with board size and a significant positive association with promoter ownership. The research makes an endeavor to search for an ideal board size and gives insights on moderating effect of firm size on corporate board performance. Study also finds that above the critical ownership level of forty percent, promoter’s interest is much aligned with that of company and there is positive effect on firm value. Corporate governance has developed as an important mechanism over the last two decades. The recent global financial crisis has reinforced the importance of good corporate governance practices and structures. It is now well recognized that corporate governance structures play an important role in enhancing firm performance and sustainability in long term (Bonn, 2004; Erickson et. al., 2005; Ehikioya, 2009; Iwasaki, 2008; Cho and Kim, 2007). There has been tremendous research on corporate governance structure and firm performance particularly in the developed world. On the other side, there is very little research on the influence of corporate governance variables such board structure on firm performance in India (Dwivedi and Jain, 2005). India as an emerging giant is gradually moving from controlled to market based economy with market capitalization of all listed companies touching nearly rupees 1 trillion (Sehgal and Mulraj, 2008). Corporate governance has now become a norm in India with Securities Exchange Board of India (SEBI) making it mandatory for all the listed to adopt Cause 49 of the Listing Agreement. However, capital markets are still nascent and market for corporate control is weak (Standard and Poor’s 2009). Indian firms are predominantly of family origin and promoters controlled (Chakrabarti, 2005). Corporate governance structures, therefore, rely much on internal structures rather than external one for enhancing the value. The corporate board and insider ownership (promoters) are in Indian business are two important internal corporate governance structures. Shleifer and Vishny (1997) have suggested that corporate governance deals with the ways in which suppliers of the finance to corporation assure themselves of getting a return on their investment. Shareholders are owners of company who contribute their wealth. Through corporate governance mechanism, they apply control over the management of the company for the wealth maximization. The boards of director’s act as representatives of shareholders achieve this endeavor by reducing the agency cost (Fama and Jensen, 1983). In Indian regulatory environment board of directors of a company act as fiduciaries of the shareholders, provide active supervision and do strategic decision-making. The Indian investors, however, have general predisposition to discount the role of board due to stronger ownership concentration and insider control. The board is an important corporate governance mechanism under Indian context to protect the minority shareholders from dominant shareholders. In addition, insider ownership by the promoters of the company is general characteristic of most firms.
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