– The financial crisis of 2008-2009 was truly global in nature that affected all sectors and countries of the world. Being considered that a board of directors is the main governance mechanism through which a company is governed and managed. The purpose of this paper is to examine the effect of the governance structure of a company on its financial performance during the period of financial crisis.
– The study investigates the effect of board structure parameters – board leadership, directors and board size on the financial performance for 164 non-financial listed firms in India during the period of financial crisis of 2008-2009.
– The study finds a significant positive effect with Chief Executive Officer duality, executive chairperson and proportion of inside directors on the firm’s financial performance. Independent directors have no significant influence, while non-executive (grey) director’s being affiliated with the firm has a negative influence on firm’s financial performance. A larger board has a negative relationship with the firm’s financial performance.
– The study is limited to large non-financial firms of the Bombay Stock Exchange-200 index. The study may be extended to include other firms to generalize the findings.
– Results imply that during the period of financial distress, a company having more inside (or management) directors with an executive chairperson are in a better position to manage company resources with positive impact on financial performance. Companies with larger boards may find it difficult to take quick decisions, which ultimately affect their performance.
– The study is original in its idea of assessing company strategy to adopt a suitable governance structure that can sustain its performance during the period of financial crisis.
