Board Characteristics and Firm Performance of Loss Making Companies: An Empirical Evidence from India

Abstract

The aim of the study is to examine the Impact of board characteristics on financial performance of loss making firms in India. Board Independence, Board Size, Frequency of Board Meetings, CEO Duality and Gender diversity are taken as independent variables and proxy for board characteristics. Further, Firm age, Leverage, Annual sale and Firm size are taken as proxy for control variables. Performance measures (i.e Return on Asset and Return on Equity) are considered as Dependant variables. The study used both financial and non financial data from the annual reports of 48 loss making companies listed at BSE stock exchange as on 31^st march, 2016. Further the companies are divided on the basis of its asset value and difference of impact of different board characteristics on both the subsets is being done.  The tools used in the study to analyse are Descriptive statistics, Structural Equation Modelling (SEM), Pearson’s’ Correlation. The study found that Board Independence has significant positive relationship with firm performance indicated by ROA. Which specifies that more independent director leads to enhance firm performance through independent and strategic decision making. Further, Women director is found to have significant negative relationship with Return on Equity while do not shows any significance impact on Return on Asset. Furthermore, Board meetings is found to have significant positive relationship with ROE in case of small sized companies while it  is found to have significant negative relationship with Return on Assets when asset size is large.