Board meeting, promoter CEO and firm performance: Evidence from India

Figures & data

Table 1. Descriptive statistics and correlation matrix of all the variables used in this analysis

Variables	N	Mean	ROA	ROCE	RONW	BS	FD	ID	CEOD	MCEO	BCEO	PCEO	BM	BMA (%)	FAGE	FS	LEV	SG
ROA	904	10.76	1
ROCE	904	16.11	0.894*	1
RONW	904	20.04	0.829*	0.933*	1
BS	904	10.53	0.013	0.003	0.064	1
FD (%)	904	11.14	0.055	0.035	0.003	−0.144*	1
ID (%)	904	52.21	−0.055	−0.064*	−0.039	−0.076*	0.192*	1
CEOD	904	0.33	−0.019	−0.041	−0.009	−0.011	−0.167**	−0.102	1
MCEO	904	0.95	0.018	0.045*	0.056	−0.056	−0.262*	−0.008	0.082*	1
BCEO	904	0.65	−0.039	−0.064	−0.026	− 0.091*	0.088*	0.056	−0.135*	−0.062	1
PCEO	904	0.32	−0.106*	−0.025	−0.031	0.029	−0.008	0.187*	0.239*	−0.105*	−0.079*	1
BM	904	6.56	0.066*	0.055	0.015	0.099*	−0.116*	−0.319*	0.263*	0.036	0.056	−0.289*	1
BMA (%)	904	79.26	0.127*	0.093*	0.064	−0.182*	0.129*	0.339*	−0.358*	0.014	0.168*	0.179*	−0.565*	1
FAGE	904	44.16	0.002	0.108*	0.038	0.172*	−0.071*	0.049	−0.045	0.062	0.072*	−0.241*	0.084*	0.021	1
FS	904	11.95	−0.334*	−0.331*	−0.236*	0.209*	−0.083*	−0.162*	0.173*	0.026	−0.031	−0.238*	0.474*	−0.316*	0.086*	1
LEV	904	0.78	−0.343*	−0.325*	−0.068*	−0.148*	0.006	−0.032	0.001	−0.179*	−0.037	−0.118*	0.117*	−0.003	−0.181*	0.422*	1
SG	904	25.78	0.018	0.022	0.003	−0.081*	−0.045	−0.033	0.052	0.009	0.028	−0.023	0.053	0.011	−0.058	−0.034	0.031	1

Note: * shows 10% level of significance

Table 2. Board characteristics and firm performance (Random and fixed effect estimation results for the whole sample)

	Random Effect Model			Fixed Effect Model
Variables	ROA	ROCE	RONW	ROA	ROCE	RONW
BS	0.157** (0.065)	0.134** (0.063)	0.172* (0.093)	0.256** (0.101)	0.133** (0.061)	0.299** (0.104)
FD	0.047** (0.022)	0.038** (0.012)	0.045** (0.015)	0.036** (0.014)	0.038** (0.011)	0.091** (0.039)
ID	−0.038** (0.018)	−0.028** (0.011)	−0.052** (0.026)	−0.041** (0.019)	−0.036** (0.012)	−0.057** (0.029)
CEOD	−0.472 (0.395)	−0.129 (0.788)	−0.466 (0.389)	−0.346 (0.473)	−0.004 (0.023)	−0.758 (0.577)
MCEO	0.148** (0.051)	0.804** (0.356)	0.998*** (0.237)	0.318** (0.074)	0.547*** (0.098)	0.669*** (0.085)
BCEO	−0.583** (0.143)	−0.227* (0.108)	−0.664** (0.202)	−0.626** (0.258)	−0.346** (0.185)	−0.613** (0.236)
PCEO	0.448*** (0.069)	0.668** (0.289)	0.938** (0.435)	0.615*** (0.191)	0.642*** (0.041)	0.954*** (0.132)
BM	0.131 (0.081)	0.221 (0.138)	0.476 (0.365)	0.109 (0.082)	0.206 (0.141)	0.488 (0.367)
BMA	0.031** (0.013)	0.075** (0.022)	0.076** (0.027)	0.025* (0.014)	0.084** (0.024)	0.101** (0.029)
FAGE	0.037** (0.017)	0.113** (0.049)	0.101* (0.051)	0.119** (0.061)	0.266** (0.105)	0.245** (0.125)
FS	−0.672*** (0.089)	−0.535*** (0.063)	−0.358*** (0.045)	−0.195** (0.591)	−0.054** (0.011)	−0.597*** (0.104)
LEV	−0.537*** (0.124)	−0.962*** (0.153)	−0.648** (0.319)	−0.402** (0.193)	−0.714** (0.358)	−0.638*** (0.094)
SG	0.004** (0.002)	0.007** (0.003)	0.018** (0.009)	0.004** (0.002)	0.015** (0.007)	0.019** (0.009)
Constant	28.006*** (4.863)	53.695*** (8.297)	76.124*** (9.395)	31.896*** (6.037)	55.632*** (10.339)	88.497*** (12.323)
LM Test	0.000	0.000	0.000	0.000	0.000	0.000
Hausman Test	0.001	0.002	0.003	0.001	0.002	0.003
Industry dummy	Yes	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.171	0.173	0.066	0.103	0.091	0.014

Notes: We estimate all models controlling for heteroscedasticity and firm-level clustering. Standard errors are in parentheses. *, ** and *** show the 10%, 5% and 1% significance level respectively

Table 3. Board characteristics and firm performance (fixed effect estimation results for large and small firms)

	Large Firms			Small Firms
Variables	ROA	ROCE	RONW	ROA	ROCE	RONW
BS	0.156 (0.101)	0.491 (0.353)	0.354 (0.283)	−0.442** (0.161)	−0.379** (0.122)	−0.505** (0.252)
FD	0.036 (0.024)	0.117 (0.098)	0.131 (0.109)	−0.106* (0.057)	−0.027* (0.15)	−0.195** (0.026)
ID	0.041** (0.019)	0.101** (0.046)	0.151** (0.063)	0.031** (0.015)	0.154** (0.071)	0.101** (0.038)
CEOD	0.447** (0.173)	0.805*** (0.182)	0.902*** (0.221)	−0.083 (0.068)	−0.161 (0.148)	−0.093 (0.349)
MCEO	0.818** (0.375)	0.581*** (0.204)	0.589** (0.229)	0.858** (0.334)	0.418** (0.186)	0.715** (0.312)
BCEO	−0.627** (0.259)	−0.251** (0.103)	−0.792** (0.305)	−0.561* (0.242)	−0.905** (0.394)	−0.947** (0.462)
PCEO	−0.615** (0.292)	−0.536* (0.247)	−0.877** (0.403)	0.301** (0.147)	0.977** (0.423)	0.992** (0.455)
BM	0.111** (0.042)	0.541** (0.282)	0.751** (0.316)	0.176 (0.261)	0.646 (0.525)	0.991 (0.874)
BMA	0.025* (0.014)	0.181*** (0.034)	0.178*** (0.038)	0.066** (0.035)	0.172** (0.069)	0.179** (0.076)
FAGE	0.119** (0.062)	0.101** (0.031)	0.083** (0.035)	0.119** (0.019)	0.141*** (0.038)	0.142** (0.042)
FS	−0.595*** (0.091)	−0.484** (0.151)	−0.758** (0.353)	−0.427** (0.219)	−0.877** (0.396)	−0.634** (0.303)
LEV	−0.442** (0.213)	−0.362*** (0.043)	0.536* (0.173)	−0.571*** (0.066)	−0.365*** (0.041)	−0.654** (0.284)
SG	0.004** (0.002)	0.008** (0.003)	0.009** (0.004)	0.009** (0.004)	0.002** (0.001)	0.002** (0.001)
Constant	31.897*** (6.038)	28.807 (44.815)	43.661 (50.191)	21.529 (16.615)	101.591** (33.409)	139.89*** (36.527)
Restricted F Test	F (44, 301) = 2.27 (0.000)	F (44, 301) = 2.11 (0.000)	F (44, 301) = 2.01 (0.000)	F (44, 301) = 1.73 (0.004)	F (44, 301) = 1.19 (0.022)	F (44, 301) = 1.41 (0.014)
LM Test	0.000	0.000	0.000	0.000	0.000	0.000
Hausman Test	0.001	0.003	0.000	0.005	0.006	0.000
Industry dummy	Yes	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.276	0.299	0.145	0.261	0.303	0.201

Notes: We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are reported in parentheses. *, **and ***show the 10%, 5% and 1% significance level respectively

Table 4. Board characteristics and firm performance (fixed effect estimation results for large and small boards)

	Large Boards			Small Boards
Variables	ROA	ROCE	RONW	ROA	ROCE	RONW
BS	0.385 (1.135)	0.492 (1.644)	0.171 (0.733)	−0.523 (0.319)	−0.014 (0.092)	−0.712 (0.543)
FD	0.141** (0.071)	0.216** (0.103)	0.246** (0.109	−0.033 (0.062)	−0.109 (0.147)	−0.092 (0.158)
ID	−0.077** (0.026)	−0.103** (0.041)	−0.133** (0.065)	0.036 (0.029)	0.067 (0.069)	0.059 (0.075)
CEOD	0.253** (0.171)	0.381** (0.136)	0.458** (0.194)	−0.871 (0.915)	−0.534 (0.642)	−0.111 (0.316)
MCEO	0.494** (0.156)	0.638** (0.278)	0.869* (0.449)	0.223** (0.084)	0.443** (0.218)	0.656** (0.292)
BCEO	−0.617** (0.295)	−0.631* (0.331)	−0.962** (0.455)	0.436** (0.205)	0.507** (0.221)	0.162* (0.092)
PCEO	−0.812** (0.341)	−0.639*** (0.091)	−0.276** (0.127)	0.775*** (0.059)	0.191** (0.081)	0.284** (0.132)
BM	0.341*** (0.057)	0.768*** (0.062)	0.946** (0.361)	−0.097 (0.231)	−0.613 (0.541)	−0.604 (0.585)
BMA	0.163*** (0.028)	0.229*** (0.041)	0.241*** (0.043)	−0.011 (0.025)	−0.049 (0.061)	−0.113 (0.165)
FAGE	0.048** (0.023)	0.075** (0.034)	0.085** (0.035)	0.008** (0.003)	0.173*** (0.043)	0.186*** (0.046)
FS	−0.589** (0.224)	−0.568** (0.259)	−0.981*** (0.081)	−0.589** (0.221)	−0.829** (0.408)	−0.801** (0.317)
LEV	−0.641*** (0.073)	−0.926*** (0.085)	−0.727** (0.323)	−0.844** (0.375)	−0.681** (0.326)	−0.964** (0.299)
SG	0.063*** (0.016)	0.078** (0.024)	0.084** (0.025)	0.009** (0.002)	0.007** (0.002)	0.005 (0.002)
Constant	21.364 (13.309)	28.419 (19.279)	26.362 (20.329)	15.695 (13.964)	65.341** (32.712)	99.637** (35.376)
Restricted F Test	F (44, 301) = 3.82 (0.000)	F (44, 301) = 3.26 (0.000)	F (44, 301) = 3.28 (0.000)	F (44, 301) = 3.63 (0.000)	F (44, 301) = 2.42 (0.000)	F (44, 301) = 1.93 (0.001)
LM Test	0.000	0.000	0.000	0.000	0.000	0.000
Hausman Test	0.004	0.000	0.002	0.001	0.014	0.001
Industry dummy	Yes	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.245	0.276	0.203	0.261	0.235	0.096

Notes: We estimate all models controlling for heteroscedasticity and firm-level clustering. Standard errors are in parentheses. *, **and ***show the 10%, 5% and 1% significance level respectively

Table 5. Board characteristics and firm performance (fixed effect estimation results for old and young firms)

	Old Firms			Young Firms
Variables	ROA	ROCE	RONW	ROA	ROCE	RONW
BS	−0.026** (0.005)	−0.388** (0.194)	−0.378** (0.137)	−0.002 (0.244)	0.214 (0.359)	−0.008 (0.502)
FD	0.009** (0.003)	0.006** (0.002)	0.008** (0.002)	0.021 (0.043)	0.079 (0.064)	0.077 (0.089)
ID	0.029** (0.013)	0.091** (0.025)	0.075** (0.018)	0.061** (0.027)	0.044** (0.021)	0.093** (0.045)
CEOD	−0.286 (0.781)	−0.773 (0.698)	−0.041 (1.951)	0.502* (0.261)	0.823** (0.367)	0.411** (0.209)
MCEO	0.698* (0.352)	0.871*** (0.139)	0.232*** (0.061)	0.586** (0.242)	0.029** (0.014)	0.481* (0.268)
BCEO	−0.572*** (0.061)	−0.339*** (0.048)	−0.233** (0.101)	−0.765 (0.782)	−0.585 (1.152)	−0.781 (0.611)
PCEO	−0.121 (0.151)	−0.862 (0.784)	−0.081 (0.224)	0.927*** (0.151)	0.446** (0.201)	0.989** (0.457)
BM	−0.346** (0.133)	−0.406** (0.189)	−0.569* (0.332)	−0.035 (0.126)	−0.155 (0.186)	0.213 (0.259)
BMA	0.116** (0.014)	0.071** (0.031)	0.071** (0.035)	−0.023** (0.004)	−0.025** (0.005)	−0.121** (0.049)
FAGE	0.078** (0.028)	−0.309* (0.171)	−0.391** (0.196)	0.139 (0.095)	−0.065 (0.141)	−0.291 (0.195)
FS	−0.126*** (0.028)	−0.313** (0.141)	−0.667** (0.295)	−0.891*** (0.055)	−0.859*** (0.093)	−0.561*** (0.061)
LEV	−0.832*** (0.095)	−0.261*** (0.041)	−0.902** (0.384)	−0.962*** (0.247)	−0.251** (0.164)	−0.244** (0.109)
SG	0.025** (0.005)	0.005** (0.002)	0.006** (0.002)	0.005** (0.002)	0.007** (0.003)	0.004** (0.002)
Constant	41.669*** (7.595)	98.669*** (16.503)	104.447*** (18.957)	42.606*** (5.288)	73.569*** (7.785)	90.928*** (10.879)
Restricted F Test	F (44, 301) = 30.44 (0.000)	F (44, 301) = 42.23 (0.000)	F (44, 301) = 32.12 (0.000)	F (44, 301) = 25.31 (0.000)	F (44, 301) = 21.46 (0.000)	F (44, 301) = 12.81 (0.000)
LM Test	0.000	0.000	0.000	0.000	0.000	0.000
Hausman Test	0.002	0.009	0.003	0.012	0.001	0.009
Industry dummy	Yes	Yes	Yes	Yes	Yes	Yes
Adjusted R^2	0.159	0.062	0.008	0.196	0.182	0.047

Notes: We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are in parentheses. *, **and ***show the 10%, 5% and 1% significance level respectively

Table 6. Board characteristics and firm performance (GMM estimation results for the total sample firms)

Variables	ROA	ROCE	RONW
L1	0.123*** (0.008)	0.754*** (0.051)	0.569*** (0.044)
BS	0.129** (0.051)	0.146** (0.078)	0.141** (0.048)
FD	0.043** (0.022)	0.016** (0.006)	0.049** (0.018)
ID	−0.019** (0.007)	−0.027** (0.012)	−0.032** (0.012)
CEOD	−0.404 (0.308)	−0.107 (0.277)	−0.293 (0.284)
MCEO	0.671** (0.204)	0.182** (0.091)	0.738** (0.322)
BCEO	−0.612** (0.273)	−0.337** (0.169)	−0.148** (0.055)
PCEO	0.496** (0.141)	0.354** (0.188)	0.469** (0.191)
BM	0.192 (0.192)	0.357 (0.304)	0.175 (0.187)
BMA	0.017** (0.004)	0.028** (0.008)	0.034** (0.015)
FAGE	0.031*** (0.006)	0.217*** (0.032)	0.189*** (0.036)
FS	−0.865** (0.377)	−0.237*** (0.034)	−0.702** (0.301)
LEV	−0.081** (0.035)	−0.251** (0.116)	−0.294*** (0.035)
SG	0.004** (0.002)	0.008** (0.002)	0.005** (0.002)
Constant	15.641** (6.793)	53.776** (15.811)	58.861** (19.734)
Wald-test (x^2)	523.66 (0.000)	735.46 (0.000)	545.82 (0.000)
Sargan test (p-value)	38.491 (0.1051)	31.922 (0.1319)	21.694 (0.2998)
AB test AR (1) (p-value)	3.388 (0.1007)	4.241 (0.1002)	3.343 (0.2008)
AB test AR (2) (p-value)	0.677 (0.4984)	1.671 (0.1074)	1.776 (0.1757)

We estimate all models controlling for heteroskedasticity and firm-level clustering. Standard errors are in parentheses below the coefficient estimates. *Significance at the 10% level. ** Significant at the 5% level. *** Significant at the 1% level

Table 7. Chow test for Return on Assets (ROA)

	ROA
	Large Firms Vs. Small Firms	Large Boards Vs. Small Boards	Old Firms Vs. Young Firms
BS	F (2, 716) = 46.29*** (0.0001)	F (2, 716) = 2.20 (0.1119)	F (2, 716) = 5.94** (0.0028)
FD	F (2, 716) = 48.70*** (0.0001)	F (2, 716) = 3.53** (0.0298)	F (2, 716) = 4.01** (0.0185)
ID	F (2, 716) = 46.52*** (0.0001)	F (2, 716) = 3.22** (0.0405)	F (2, 716) = 3.51** (0.0304)
CEOD	F (2, 716) = 44.61*** (0.0001)	F (2, 716) = 3.00* (0.0505)	F (2, 716) = 3.81** (0.0226)
MCEO	F (2, 716) = 45.88*** (0.0001)	F (2, 716) = 3.14** (0.0439)	F (2, 716) = 6.75** (0.0013)
BCEO	F (2, 716) = 46.52*** (0.0001)	F (2, 716) = 3.88** (0.0211)	F (2, 716) = 3.94** (0.0199)
PCEO	F (2, 716) = 42.77*** (0.0001)	F (2, 716) = 3.22** (0.0407)	F (2, 716) = 4.43** (0.0123)
BM	F (2, 716) = 31.97*** (0.0001)	F (2, 716) = 15.43*** (0.0001)	F (2, 716) = 4.92** (0.0075)
BMA	F (2, 716) = 44.03*** (0.0001)	F (2, 716) = 3.44** (0.0326)	F (2, 716) = 5.11** (0.0063)

Notes: Figures in the parenthesis show the probability values. ***, ** and *indicate 1, 5 and 10% level of significance, respectively

Table 8. Chow test for return on capital employed (ROCE)

	ROCE
	Large Firms Vs. Small Firms	Large Boards Vs. Small Boards	Old Firms Vs. Young Firms
BS	F (2, 716) = 50.59*** (0.0001)	F (2, 716) = 2.27 (0.1041)	F (2, 716) = 6.07** (0.0024)
FD	F (2, 716) = 49.09*** (0.0001)	F (2, 716) = 3.50** (0.0307)	F (2, 716) = 3.47* (0.0316)
ID	F (2, 716) = 46.36*** (0.0001)	F (2, 716) = 5.13** (0.0061)	F (2, 716) = 3.71* (0.0249)
CEOD	F (2, 716) = 52.37*** (0.0001)	F (2, 716) = 4.97** (0.0072)	F (2, 716) = 3.15** (0.0434)
MCEO	F (2, 716) = 48.73*** (0.0001)	F (2, 716) = 4.09** (0.0171)	F (2, 716) = 18.63*** (0.0001)
BCEO	F (2, 716) = 49.20*** (0.0001)	F (2, 716) = 3.41** (0.0336)	F (2, 716) = 4.51** (0.0113)
PCEO	F (2, 716) = 50.16*** (0.0001)	F (2, 716) = 3.18** (0.0422)	F (2, 716) = 8.80** (0.0002)
BM	F (2, 716) = 40.28*** (0.0001)	F (2, 716) = 7.99** (0.0004)	F (2, 716) = 3.32** (0.0369)
BMA	F (2, 716) = 55.56*** (0.0001)	F (2, 716) = 3.35** (0.0356)	F (2, 716) = 3.62** (0.0273)

Notes: Figures in the parenthesis show the probability values. ***, ** and *indicate 1, 5 and 10% level of significance, respectively

Table 9. Chow test for Return on Net Worth (RONW)

	RONW
	Large Firms Vs. Small Firms	Large Boards Vs. Small Boards	Old Firms Vs. Young Firms
BS	F (2, 716) = 20.79*** (0.0001)	F (2, 716) = 1.21 (0.2988)	F (2, 716) = 3.70** (0.0252)
FD	F (2, 716) = 26.14*** (0.0001)	F (2, 716) = 5.78** (0.0032)	F (2, 716) = 3.13** (0.0443)
ID	F (2, 716) = 23.13*** (0.0001)	F (2, 716) = 7.93** (0.0004)	F (2, 716) = 3.98** (0.0191)
CEOD	F (2, 716) = 26.75*** (0.0001)	F (2, 716) = 6.09** (0.0024)	F (2, 716) = 3.26** (0.0390)
MCEO	F (2, 716) = 24.03*** (0.0001)	F (2, 716) = 7.35** (0.0007)	F (2, 716) = 13.85*** (0.0001)
BCEO	F (2, 716) = 25.37*** (0.0001)	F (2, 716) = 5.43** (0.0046)	F (2, 716) = 3.78** (0.0233)
PCEO	F (2, 716) = 24.32*** (0.0001)	F (2, 716) = 5.36** (0.0049)	F (2, 716) = 5.17** (0.0059)
BM	F (2, 716) = 20.51*** (0.0001)	F (2, 716) = 8.90** (0.0002)	F (2, 716) = 4.21** (0.0152)
BMA	F (2, 716) = 34.19*** (0.0001)	F (2, 716) = 7.02** (0.001)	F (2, 716) = 3.20** (0.0413)

Notes: Figures in the parenthesis show the probability values. ***, ** and *indicate 1, 5 and 10% level of significance, respectively

Table

Variables	Hypothesis	Findings (status)
BS	±	+
FD	±	+
ID	+	-
CEOD	±	-
MCEO	+	+
BCEO	±	-
PCEO	±	+
BM	±	+
BMA	+	+

Table A1. Number and proportion of firms by industry classification

Industry	Number	Percentage
Automobile and textile	13	11.50
Drugs and Health care	11	9.73
Finance services and others	10	8.85
Oil, Gas, and Refinery	10	8.85
Consumer products and Tobacco	9	7.96
Steel and Metals	9	7.96
IT	8	7.08
Cement, Paints and varnishes	8	7.08
Electrical machinery, tyres & tubes and transport services	7	6.20
Electricity and Telecommunication services	5	4.44
Engineering, Construction and allied activities	4	3.54
Machinery and industrial equipment	4	3.54
Chemicals	2	1.77
Media-broadcasting	2	1.77
Others	11	9.73
Total	113	100

Operationalization of variables

Variables	Proxy	Operationalization	Predicted Sign	Source
	Panel A: Dependent Variables (Firm Performance)
Firm Performance	ROA	Net Profit/Total Assets		Bloomberg
	ROCE	Earnings before interest and taxes/ (Total assets—Current liabilities)		Bloomberg
	RONW	Net Profit/Total Equity		Bloomberg
	Panel B: Independent Variables (Board Characteristics)
Size	BS	Total number of directors on board during the year	±	Annual Report
Gender diversity	FD	Percentages of women directors on board during the year	±	Annual Report
Independence	ID	Percentages of independent directors on board during the year	+	Annual Report
Leadership	CEOD	If both Chairman and CEO is one person = 1 or else 0	±	Annual Report
	MCEO	If the CEO is a male = 1 or else 0	+	Annual Report
	BCEO	If the CEO has more than three directorships other than the home company = 0 or else 1	±	Annual Report
	PCEO	If the CEO is a promoter = 1 or else 0	±	Annual Report
Monitoring	BM	Total number of board meetings during the year	±	Annual Report
	BMA	Percentage of board meetings attended by the total board members during the year	+	Annual Report
	Panel C: Control Variables
Firm Size	FS	Natural log of total assets		Prowess IQ
Leverage	LEV	Debt-to-equity ratio		Prowess IQ
Firm Age	FA	Age of the firm up to 2020 since its incorporation year		Prowess IQ
Sales Growth	SG	(Present value of sales—the past value of sales)/past value of sales		Prowess IQ