Unveiling the corporate governance dynamics: exploring the nexus of board composition, audit committee attributes, foreign ownership, and firm performance in an emerging market

This study investigates the collective impact of key corporate governance variables namely board composition, audit committee characteristics, and foreign ownership on firm performance in an emerging economy, India. Unlike prior research that examines these mechanisms in isolation, this study highlights their significance and evaluates their collective influence, particularly in light of the regulatory changes introduced by the Companies Act, 2013. To address methodological limitations in prior studies, this research employs the System Generalized Method of Moments (GMM) to mitigate endogeneity concerns and uses Ordinary Least Squares (OLS) for robustness checks. The results reveal that these governance mechanisms when analyzed together, provide deeper insights into their synergistic effects on operational efficiency and profitability. Board meetings suggesting their importance in strategic decision-making whereas Gender diversity demonstrating the importance of diverse viewpoints. Influence of CEO duality is ambiguous, implying a complex influence on performance results. Independent directors’ presence and more prominently independent audit committees is directly linked with improved performance, indicating improved governance and monitoring. Larger board sizes, on the other hand, have a negative influence, emphasizing possible complexity in collaborative decision-making. For policymakers, reinforcing diversity policies could enhance firm performance, while for companies, limiting board size may reduce decision-making delays. Regulators could consider incentivizing foreign ownership, given its positive association with firm value, and strengthening audit committee independence to bolster monitoring functions. Investors may also view gender-diverse boards and foreign-owned companies as favourable indicators of long-term performance.