Corporate governance and valuations: Evidence from selected Indian companies

This study analyses the impact of corporate governance (CG) mechanisms on valuations of selected companies in Fast Moving Consumer Goods and Information Technology sectors in India. The study is carried out for the period 2002–2006 because improvement initiatives of CG were undertaken during the period. The panel data regression method is used to examine the impact of CG factors on market valuation. Data consisting of a sample of 30 companies for the entire five-year period represent the database for this study. Results obtained showed an overall strong significant relationship between CG and market value of a firm. Of all the CG mechanisms (representing CG) studied, however, only shareholders' rights, and value creation for stakeholders, emerged as important for impact on the valuation. The findings are expected to have practical implications for directors, owners and regulators to formulate the CG codes and guidelines.