Corporate Governance and Firm Value: Review of Research in view of Major Reforms in India

Abstract

This paper attempts to provide a brief description about the theoretical framework of governance as well as reviews the empirical studies dealing with relationship between corporate governance (CG) and firm value (FV). It also provides an overview of the major governance reforms in India while developing the expected hypotheses for future research in Indian context. To this end, the paper uses systematic electronic literature search method which takes into account 70 empirical studies published over the period of 1992-2018. A summary of empirical findings shows lack of consensus about the nature of relationship between governance and firm value which can be attributed to several factors such as, lack of uniform measure to capture the abstract concept of CG, variations in the choice of variables used for FV, institutional differences in different studies, etc. In addition, a closer insight into the studies from developing countries like India depicts that optimal governance is likely to vary under different market settings as there exist some key differences between developed and developing markets, for example, ownership structure, which limits generalizability of findings. Against this backdrop, the paper emphasizes on the need for more empirical studies from emerging markets such as India and suggests a desirable technique to capture CG so as to gain better insights of its exact relationship with FV.