THE EFFECT OF DIFFERENT TYPES OF DIRECTORS ON CORPORATE PERFORMANCE: EVIDENCE FROM INDIAN LISTED COMPANIES.
Dake, Ghoshal Vishwas (2007) THE EFFECT OF DIFFERENT TYPES OF DIRECTORS ON CORPORATE PERFORMANCE: EVIDENCE FROM INDIAN LISTED COMPANIES. [Dissertation (University of Nottingham only)] (Unpublished)
The Corporate Governance literature is highly contradictory on the role of board composition in determining corporate performance. Three contradictions have emerged: First, larger boards will have greater human capital and so will have a positive effect on performance due to the skills of the board members; Second larger board size would create coordination and free rider problems that detract from performance; and third, there is an inverted U shaped relationship between board size and performance. These contradictions are due to three key weaknesses. First earlier researchers do not bifurcate between different types of directors and study their independent effects on corporate performance. Second research is rarely longitudinal and rarely considers the number of board meetings conducted during the year. Third there has been lot of literature on the independence function of the non-executives but very little has been said about the role the related non-executives and non-executive chairman might play in particular. The independence role is better suited with the independent directors and the related non-executives often have to play two contradictory, non complementary roles, namely, resource dependency along with independence. This study resolves these three issues and finds that greater number of independent directors coupled with board meetings positively drives performance; related non-executive directors and the non-executive chairman negatively affects performance; and the total board size and executive directors do not bear any relationship with performance. These findings are discussed and several implications are drawn for theory, managers and regulators.
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