Nachane, D M and Ghosh, Saibal and Ray, Partha (2005): Bank nominee directors and corporate performance: micro evidence for India. Published in: Economic and Politcal Weekly , Vol. 40, (19. March 2005)
Download (49kB) | Preview
Banks and financial institutions play a major role in governance of non-financial companies in India through the mechanism of nominee directors. This paper probes two allied issues: firstly, the isolation of the firm specific factors which determine the presence of bank nominee directors on boards and secondly, whether companies, with bank nominee directors exhibit better performance/governance than companies with no banker representation on their boards. A Probit model estimated over a cross-section of Indian manufacturing firms for 2003, indicates that bankers on boards seem to exert a healthy impact on the companies. In fact, large public limited companies are likely to exhibit banker representation, primarily in their role as expertise providers. The evidence from Tobit model reconfirms these results.
|Item Type:||MPRA Paper|
|Institution:||Economic and Political Weekly|
|Original Title:||Bank nominee directors and corporate performance: micro evidence for India|
|Keywords:||Banker; corporate governance; debt equity ratio|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C35 - Discrete Regression and Qualitative Choice Models ; Discrete Regressors ; Proportions
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill
|Depositing User:||Saibal Ghosh|
|Date Deposited:||11. Jun 2007|
|Last Modified:||07. Jan 2014 18:28|
Adams, R and H Mehran (2003): ‘Is Corporate Governance Different for Bank Holding Companies?’, Federal Reserve Bank of New York, Economic Policy Review, April, 123-42. Allen, F and D Gale (2000): Comparing Financial Systems, MIT Press, Cambridge. Anderson, C W and T L Campbell (2003): ‘Corporate Governance of Japanese Banks’, Journal of Corporate Finance, pp 189, 1-28. Banaji, Jairus (2004): ‘Institutional Investors and Nominee Directors’ in Reed, Darryl and Sanjoy Mukherjee (eds), Corporate Governance, Economic Reforms and Development: The Indian Experience, Oxford University Press, Delhi. Blue Ribbon Committee (1999): Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committee, New York Stock Exchange and National Association of Securities Dealers, New York. Booth, J R and D Deli (1999): ‘On Executives of Financial Institutions as Outside Directors’, Journal of Corporate Finance, 5, pp 227-50. Booth, L, V Aivazian, A Demirguc-Kunt and V Maksimovic (2001): ‘Capital Structures in Developing Countries’, Journal of Finance, 56, pp 87-130. Boubakri, N, J C Cosset and O Guedhami (2003): ‘Privatisation, Corporate Governance and Economic Environment: Firm-Level Evidence from Asia’, Pacific-Basin Finance Journal, 281, pp 1-26. Cadbury Committee (1992): Report of the Committee on the Financial Aspects of Corporate Governance, Gee, London. Chibber, P K and S K Majumdar (1999): ‘Foreign Ownership and Profitability: Property Rights, Control, and the Performance of Firms in Indian Industry’, Journal of Law and Economics, 42, pp 209-38. Chtourou, S, J Bedard and L Courteau (2001): ‘Corporate Governance and Earnings Management’, Working Paper, Universite Laval, Canada. Coase, R (1937): ‘The Nature of the Firm’, Economica, 4, pp 386-405. D’Souza, E (2000): ‘Structure of Corporate Finance and Corporate Governance in India’, Economic and Political Weekly, November, pp 4196-4205. Davis, E P (2002): ‘Institutional Investors, Corporate Governance and the Performance of the Corporate Sector, Economic Systems, 26, pp 203-29. Diamond, D (1984): ‘Financial Intermediation and Delegated Monitoring’, Review of Economic Studies, 51, pp 393-414. Fama, E and M Jensen (1983): ‘Separation of Ownership and Control’, Journal of Law and Economics, 26, pp 301-25. Ghosh, A D (2005): ‘Emerging Corporate Board Practices’, Economic and Political Weekly, February.
Economic and Political Weekly March 19, 2005 1223 Ghosh, S and A Das (2004): ‘Corporate Governance in Indian Banking: An Empirical Investigation’, Economic and Political Weekly, February. Ghosh, S and R Sensarma (2004): ‘Does Monetary Policy Matter for Corporate Governance? Firm-Level Evidence for India’ in M Hirschey, K John and A Makhija (eds), Advances in Financial Economics, Vol 9 (Corporate Governance), Elsevier Science, Amsterdam. Gompers, Paul A, Joy L Ishii, and Andrew Metrick (2001): ‘Corporate Governance and Equity Prices’, Wharton School Working Paper, No 018, Pennsylvania. Gopinath, Shyamala (2004): ‘Corporate Governance: Towards Best Practices’, RBI Bulletin, December. Government of India (2002): ‘Report of the Committee on Corporate Audit and Governance’ (chairman, Naresh Chandra), New Delhi. Green, C J, V Murinde and J Suppakitjarak (2002): ‘Corporate Financial Structures in India’, Economic Research Paper, No 4, (April), Loughborough University, UK. Grossman, S and O Hart (1988): ‘One Share – One Vote and the Market for Corporate Control’, Journal of Financial Economics, 20, pp 175-202. Hart, O and J Moore (1990): ‘Property Rights and the Nature of the Firm’, Journal of Political Economy, 98, pp 1119-58. Hellwig, M (1991): ‘Banking, Financial Intermediation and Corporate Finance’ in A Giovannini and C P Mayer (eds) European Financial Integration, Cambridge University Press, Cambridge. Hoshi, T, A Kashyap and D Scharfstein (1990): ‘The Role of Banks in Reducing the Costs of Financial Distress in Japan’, Journal of Financial Economics, 27, pp 67-88. Jensen, M (1993): ‘The Modern Industrial Revolution, Exit and the Failure of Internal Control Systems’, The Journal of Finance, 48, pp 831-80. Jensen, M and W Meckling (1976): ‘Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure’, Journal of Financial Economics, 3, pp 305-60. Joh, S W (2003): ‘Corporate Governance and Firm Profitability: Evidence from Korea before the Economic Crisis’, Journal of Financial Economics, 68, pp 287-22. Kaplan, S (1994): ‘Top Executive Rewards and Firm Performance: A Comparison of Japan and the United States’ Journal of Political Economy, 102, pp 510-46. Khanna, T and K Palepu (2000): ‘Is Group Affiliation Profitable in Emerging Markets: An Analysis of Diversified Indian Business Groups?’, Journal of Finance, 55, pp 867-91. Klein, A (1998): ‘Firm Performance and Board Committee Structure’, Journal of Law and Economics, 41, pp 275-302. Kroszner, R S and P E Strahan (2001a): ‘Bankers on Boards: Monitoring, Conflicts of Interests and Lender Liability’, Journal of Financial Economics, 62, pp 415-52. – (2001b): ‘Throwing Good Money After Bad? Board Connections and Conflicts in Bank Lending’, Working Paper, Wharton School, Pennsylvania. La, Porta, R, F Lopez-de-Silanes, A Shleifer and R WVishny (1997): ‘Legal Determinants of External Finance’, The Journal of Finance, 52, pp 1131-50. La, Porta, R, F Lopez-de-Silanes and A Shleifer (1998): ‘Law and Finance’, Journal of Political Economy, 106, pp 1113-55. Mace, M L (1986): Directors: Myth and Reality, Harvard Business School Press. Macey, J and M O’Hara (2003): ‘The Corporate Governance of Banks’, Federal Reserve Bank of New York, Economic Policy Review, April, pp 91-107. Monks, R and N Minow (1995): Corporate Governance, Blackwell, Cambridge, Mass. Organisation for Economic Cooperation and Development (1995): Corporate Governance Environments in OECD Countries, OECD, Paris. – (1999): Core Principles for Corporate Governance, OECD, Paris. Park, Y W and H H Shin (2004): ‘Board Composition and Earnings Management in Canada’, Journal of Corporate Finance, 10, pp 431-57. Rajan, R G (1992): ‘Insiders and Outsider: The Choice between Informed and Arm’s Length Debt’, The Journal of Finance, 47, pp 1367-1400. Reddy, Y V (1999): ‘Corporate Governance in Financial Sector’, RBI Bulletin, July. Rosenstein, S and J G Wyatt (1990): ‘Outside Directors, Board Independence and Shareholder Wealth’, Journal of Financial Economics, 26, pp 175-192. Sarkar, J and S Sarkar (2000): ‘Large Shareholder Activism in Corporate Governance in Developing Countries: Evidence from India’, International Review of Finance, 1, pp 161-94. Shleifer, A and R W Vishny (1997): ‘A Survey of Corporate Governance’, The Journal of Finance, 52, pp 737-83. Yafeh, Y and O Yosha (2003): ‘Large Shareholders and Banks: Who Monitors and How?’, Economic Journal, 113, pp 128-46. World Bank (2004): Report on the Observance of Standards and Codes (ROSC) Corporate Governance Country Assessment: India, (available at www.worldbank.org)