Corporate Governance is an act or manner of governing a company. It aims at promoting fairness, transparency and accountability of an entity. This paper attempts to study the extent to which the BSE 100 listed firms are following the corporate governance guidelines that are mandatory for the firms to adopt. Also the effect of corporate governance on the profit, return on equity and return on capital employed of the company is analyzed for the year 2015. The paper also aims to study the impact of financial variables on the company’s profitability by way of stepwise regression analysis. The results of the study show that earnings per share, leverage, net worth, size of the company and share price are more or less the major factors that significantly impact the return and profit-earning capacity of any company. From the models, it is clear that with better corporate governance scores, firms can achieve greater returns on their capital invested. The results also state that 73% of the companies in the sample abide by all the regulations of the corporate governance. With the revision of corporate governance guidelines in terms of scope of independent directors, whistleblower policy, disclosure requirements and many more, other firms are also working towards achieving better scores and thus churning more profits.

A company, although is a legal entity, it is an artificial person which cannot act on its own. Shareholders elect a group of individuals to act as their representatives, termed as board of directors, who govern the company on their behalf. The governance of a company devolves into a field which is filled with challenges arising primarily on account of separation of ownership and control in companies. It gained momentum in developed countries in the early 1990s, and later in the developing economies. The whole gamut of governance of corporate entities by then has been framed as Corporate Governance (CG) which encompasses not just the board but also other mechanisms like external markets to monitor poor performing managers, regulatory agencies, institutional investors, block holders of shares and the framework under which power is exercised over corporate entities.

Corporate Governance Journal, Impact of Corporate Governance, Financial Parameters on Profitability.