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Impact of Board and CEO characteristics on Firms’ Performance

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  • Singla, Chitra

Abstract

Corporate governance characteristics like board composition and leadership impact a firm’s performance. Researchers have attempted to explain the relationship using different theoretical perspectives like agency theory, resource dependence theory, and stewardship theory. However, the literature presents ambiguous results where some empirical findings support negative impact and other support positive impact. In this paper, we argue that ambiguity in results could be due to the context specificity of the nature of this relationship. In some contexts, agency theory might be more valid than other theories and in others stewardship theory or resource dependence theory might be more valid. Building on this context specificity, we look at the relationship between board and CEO characteristics on firm’s performance in a longitudinal sample of Indian firms. Our findings suggest that none of the above mentioned theories are completely valid in the India context because we get mixed support for these theories. This calls for a mid-range theory to explain the relationship between corporate governance characteristics and firm’s performance.

Suggested Citation

  • Singla, Chitra, 2016. "Impact of Board and CEO characteristics on Firms’ Performance," IIMA Working Papers WP2016-03-35, Indian Institute of Management Ahmedabad, Research and Publication Department.
    • Handle: RePEc:iim:iimawp:14487
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    References listed on IDEAS

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    1. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-349, June.
    2. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    3. John A. Pearce & Shaker A. Zahra, 1992. "Board Composition From A Strategic Contingency Perspective," Journal of Management Studies, Wiley Blackwell, vol. 29(4), pages 411-438, July.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Melinda Muth & Lex Donaldson, 1998. "Stewardship Theory and Board Structure: a contingency approach," Corporate Governance: An International Review, Wiley Blackwell, vol. 6(1), pages 5-28, January.
    6. Lex Donaldson & James H. Davis, 1991. "Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns," Australian Journal of Management, Australian School of Business, vol. 16(1), pages 49-64, June.
    7. Rajeswararao S. Chaganti & Vijay Mahajan & Subhash Sharma, 1985. "Corporate Board Size, Composition And Corporate Failures In Retailing Industry[1]," Journal of Management Studies, Wiley Blackwell, vol. 22(4), pages 400-417, July.
    8. Brian K. Boyd, 1995. "CEO duality and firm performance: A contingency model," Strategic Management Journal, Wiley Blackwell, vol. 16(4), pages 301-312.
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    1. Tutun Mukherjee & Som Sankar Sen, 2022. "Impact of CEO attributes on corporate reputation, financial performance, and corporate sustainable growth: evidence from India," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-50, December.

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