Impact of Corporate Governance on the Financial Performance and Market Valuation: An Empirical Study of Indian Manufacturing Sector

This paper aims to analyze the impact of corporate governance on the financial performance and market valuation using latest data (2004–05 to 2013–14) of NSE listed manufacturing companies in India. Data obtained from CMIE (Centre for Monitoring Indian Economy) data base. The financial performance and market valuation have been taken as dependent variables while corporate governance has been taken as independent variable. The financial performance is measured by profitability and corporate governance is measured by the board size, audit committee members, board meetings, non-executive directors, auditors fees and directors remuneration. Besides these, other variables like Debt to equity ratio (DTE) and size of firm (SIZE) are also used in study to control their effect on dependent variables. Hausman test shows significant result that's why fixed effect model is used in the study. The results revealed that corporate governance is partially associated with the market to book value and financial performance.