6 March 2024
Impact of Corporate Governance and Capital Structure on Firm Value
Board-centred mechanisms and capital structure are critical aspects of corporate governance, which, in turn, influences a firm's value. This finding emerged in a recent research titled, "Moderating effect of capital structure on the relationship between corporate governance mechanisms and firm value: Evidence from India."
The researchers analysed data from over 300 non-financial Indian companies from 2013 to 2022, using fixed-effect panel models and Generalised Method of Moments (GMM) estimations. They found a correlation between a larger board of directors and increased company valuation for companies resorting to significant borrowing. Conversely, board size has a lower impact on valuation for companies with minimal borrowing. Additionally, the quantum of borrowing by companies with small boards has no effect on their value.
The exposition of this research is available in a paper by Ahmedabad University Professors Vibha Tripathi and Vinodh Madhavan, co-authored with Professor Satish Kumar from Indian Institute of Management Nagpur and Professor John W. Goodell from The University of Akron, USA. The paper has been published in the International Review of Economics & Finance.
