The IUP Journal of Corporate Governance
Are Indian Boards Truly Independent? Evidence from IPO-Issuing Firms

Article Details
Pub. Date : Jan, 2019
Product Name : The IUP Journal of Corporate Governance
Product Type : Article
Product Code : IJCG11901
Author Name : Rekha Handa
Availability : YES
Subject/Domain : Management
Download Format : PDF Format
No. of Pages : 16



The present study is an attempt to examine the relationship between board independence and performance through a comprehensive sample of Indian IPOs. An IPO which marks a critical event for a firm calls for thorough preparedness on all fronts for good returns. In this direction, independent directors on the board of a company are expected to usher in unbiased decision making and thus contribute to better performance. With a sample of 626 IPOs, the present study explores the contribution of independent directors and establishes a quadratic relation to initial returns of IPOs, which first has a negative impact on initial returns and then generates positive returns. It is concluded that the purported contribution of independent directors becomes discernible only after regulatory compulsions are settled. The paper questions the real independence of these directors on boards of Indian IPOs, which seem to be governed solely by the notion of fulfilling regulatory requirements in letter.


Corporate governance has been recognized as an essential factor in a firm’s performance. The focus of governance philosophy is on alignment of interests of managers and the claimholders through internal and external mechanisms. The relevance of board structures and composition assumes huge significance in making monitoring effective and decision making relevant. The board of directors remains an indispensable part of corporates and their competence directly affects the quality of decisions arrived at. As corporate governance mechanisms assumed significance, the indispensable role of an effective board was realized as an essential ingredient of good governance. In the light of this fact, board structures generally and board independence specifically become consequential.