Variable measurement and data source
| Variable | Measurement | Data source |
|---|---|---|
| Panel A: Dependent variable | ||
| Corporate investment inefficiency (INV_INEFF) | The absolute value of the residuals from the investment model is described by Biddle et al. (2009) | Authors’ calculations |
| Overinvestment (OI) | The positive value of the residuals from the investment model is described by Biddle et al. (2009) | Authors’ calculations |
| Underinvestment (UI) | The absolute value of the negative residuals from the investment model is described by Biddle et al. (2009) | Authors’ calculations |
| Panel B: Independent variables | ||
| Geopolitical risk (GPR) | The yearly GPR index is calculated by taking the natural logarithm of the average GPR over the 12 months of the fiscal year | Caldara and Iacoviello (2022) |
| Geopolitical threats (GPRT) | The yearly GPRT index is calculated by taking the natural logarithm of the average GPRT over the 12 months of the fiscal year | Caldara and Iacoviello (2022) |
| Geopolitical acts (GPRA) | The yearly GPRA index is calculated by taking the natural logarithm of the average GPRA over the 12 months of the fiscal year | Caldara and Iacoviello (2022) |
| Geopolitical risk India (GPR_IND) | Country-specific GPR index for India | Caldara and Iacoviello (2022) |
| Corporate Governance Index (CGI) | A firm-level CG index is developed using 65 CG indicators. [ Appendix Table A2 for details.] | Authors’ calculations |
| Panel C: Control variables | ||
| Tangibility (TANG) | The net property, plant, and equipment ratio to the lagged total assets | Authors’ calculations |
| Size (SIZE) | Logarithm (total assets) | Authors’ calculations |
| Return on asset (ROA) | Income before extraordinary items divided by lagged total assets | Authors’ calculations |
| Leverage (LEVE) | Total debt to lagged total assets | Authors’ calculations |
| Cash (CASH) | The cash and cash equivalent are deflated by lagged total assets | Authors’ calculations |
| Financial Slack (SLACK) | Cash/net PPE | Authors’ calculations |
| Operating cycle (Ln_OC) | The operating cycle is the sum of total inventory to cost of goods sold and total receivables to sales multiplied by 360 | Authors’ calculations |
| Return on equity (ROE) | Income before extraordinary items is divided by its shareholders' equity | Authors’ calculations |
| Cash flow for operations (CFO) | Operating cash flows/total lagged assets | Authors’ calculations |
| Tobin's Q (TOBINSQ) | The market value of assets/book value of assets | Authors’ calculations |
| Firm age (Ln_Age) | Log of (company's fiscal year - incorporation years) | Authors’ calculations |
| GDP Growth (GDP_GRO) | Yearly GDP growth | World Bank |
| Variable | Measurement | Data source |
|---|---|---|
| Corporate investment inefficiency (INV_INEFF) | The absolute value of the residuals from the investment model is described by | Authors’ calculations |
| Overinvestment (OI) | The positive value of the residuals from the investment model is described by | Authors’ calculations |
| Underinvestment (UI) | The absolute value of the negative residuals from the investment model is described by | Authors’ calculations |
| Geopolitical risk (GPR) | The yearly GPR index is calculated by taking the natural logarithm of the average GPR over the 12 months of the fiscal year | |
| Geopolitical threats (GPRT) | The yearly GPRT index is calculated by taking the natural logarithm of the average GPRT over the 12 months of the fiscal year | |
| Geopolitical acts (GPRA) | The yearly GPRA index is calculated by taking the natural logarithm of the average GPRA over the 12 months of the fiscal year | |
| Geopolitical risk India (GPR_IND) | Country-specific GPR index for India | |
| Corporate Governance Index (CGI) | A firm-level CG index is developed using 65 CG indicators. [ | Authors’ calculations |
| Tangibility (TANG) | The net property, plant, and equipment ratio to the lagged total assets | Authors’ calculations |
| Size (SIZE) | Logarithm (total assets) | Authors’ calculations |
| Return on asset (ROA) | Income before extraordinary items divided by lagged total assets | Authors’ calculations |
| Leverage (LEVE) | Total debt to lagged total assets | Authors’ calculations |
| Cash (CASH) | The cash and cash equivalent are deflated by lagged total assets | Authors’ calculations |
| Financial Slack (SLACK) | Cash/net PPE | Authors’ calculations |
| Operating cycle (Ln_OC) | The operating cycle is the sum of total inventory to cost of goods sold and total receivables to sales multiplied by 360 | Authors’ calculations |
| Return on equity (ROE) | Income before extraordinary items is divided by its shareholders' equity | Authors’ calculations |
| Cash flow for operations (CFO) | Operating cash flows/total lagged assets | Authors’ calculations |
| Tobin's Q (TOBINSQ) | The market value of assets/book value of assets | Authors’ calculations |
| Firm age (Ln_Age) | Log of (company's fiscal year - incorporation years) | Authors’ calculations |
| GDP Growth (GDP_GRO) | Yearly GDP growth | World Bank |
Construction of CGI from 2009 to 2022
| Serial No | Description | No. | Mean |
|---|---|---|---|
| A. Board structure index (BINDEX) | |||
| BSI 1 | If the firm's board size is 7–15, assign 1; if it is less than 7 or greater than 15, assign 0 | 7,084 | 0.81 |
| BSI 2 | The absence of chief executive officer (CEO) duality | 7,084 | 0.71 |
| BSI 3 | If non-executive directors (NEDs) serve as the board's chairman, at least one-third of the board must comprise independent directors (IDs) | 7,084 | 0.49 |
| BSI 4 | If executive directors (EDs) serve as the board's chairman, at least half of the board must comprise IDs | 7,084 | 0.36 |
| BSI 5 | There is at least one female director on the board | 7,084 | 0.98 |
| BSI 6 | Ensure that the board comprises at least 50% NEDs | 7,084 | 0.97 |
| BSI 7 | The board has evaluated its performance and the performance of its subcommittees using a code of conduct | 7,084 | 0.97 |
| BSI 8 | Former CEOs should not be board members | 7,084 | 0.43 |
| BSI 9 | A NED as the board chairman | 7,084 | 0.53 |
| BSI 10 | An ID serves as the board chairman | 7,084 | 0.16 |
| BSI 11 | The percentage of women directors on board is at least 30% | 7,084 | 0.04 |
| BSI 12 | The board of directors should include at least one promoter | 7,084 | 0.48 |
| BSI 13 | A female CEO is present on the board | 7,084 | 0.03 |
| BSI 14 | The board's chairman is a woman | 7,084 | 0.02 |
| BSI 15 | The board includes the nominee director | 7,084 | 0.16 |
| BSI 16 | At least four board meetings are held annually | 7,084 | 0.99 |
| BSI 17 | If the board chairman attended the most recent Annual General Meeting (AGM) | 7,084 | 0.86 |
| BSI 18 | At the last AGM, the CEO attended | 7,084 | 0.89 |
| BSI 19 | Less than half of all independent board directors serve on three or more boards | 7,084 | 0.72 |
| BSI 20 | CEO serves on less than three other public company boards | 7,084 | 0.88 |
| BSI 21 | The ED cannot hold directorship/chairmanship on more than three listed firms | 7,084 | 0.55 |
| BSI 22 | The NED cannot hold directorship on more than seven listed firms | 7,084 | 0.47 |
| BSI 23 | Across all companies, a director cannot be the chairman of more than five committees or a member of more than ten committees | 7,084 | 0.89 |
| BSI 24 | Board meetings must have 75% attendance, including all directors | 7,084 | 0.84 |
| BSI 25 | The report outlines an independent directors' meeting in the financial year. Ensure at least 75% attendance at independent director meetings | 7,084 | 0.80 |
| Board sub-index score (0–100) | 7,084 | 62.55 | |
| B. Audit committee index (AINDEX) | |||
| ACI 1 | There should be at least three directors on the audit committee | 7,084 | 0.99 |
| ACI 2 | The audit committee must have two-thirds independent directors | 7,084 | 0.87 |
| ACI 3 | An independent/non-executive director serves as the audit committee's chairperson | 7,084 | 0.97 |
| ACI 4 | Every financial year, the audit committee must hold at least four meetings | 7,084 | 0.98 |
| ACI 5 | The audit committee members must have attended at least 75% of the board meetings | 7,084 | 0.96 |
| ACI 6 | Less than half of audit committee directors hold directorships on three or more boards | 7,084 | 0.69 |
| ACI 7 | The audit committee should not include the CEO/managing director (MD) | 7,084 | 0.82 |
| ACI 8 | The audit committee chairman and board chairman should not be the same | 7,084 | 0.94 |
| ACI 9 | The chairman of the audit committee attends the company's last AGM | 7,084 | 0.88 |
| ACI 10 | The audit committee must be entirely consisting of NEDs | 7,084 | 0.68 |
| ACI 11 | The audit committee includes at least one person with expertise and understanding in finance or accounting | 7,084 | 0.72 |
| ACI 12 | Ensure that one of the auditors is affiliated with BIG four auditing firms | 7,084 | 0.32 |
| ACI 13 | Every five years, the audit partner should change | 7,084 | 0.85 |
| ACI 14 | Check the auditor's opinion | 7,084 | 0.97 |
| ACI 15 | The amount of consulting fees paid to auditors is lower than that of audit fees | 7,084 | 0.91 |
| Audit sub-index score (0–100) | 7,084 | 83.86 | |
| C. Nomination and Remuneration (N&R) Committee Index (NRINDEX) | |||
| NRI 1 | There should be at least three directors on the nomination and remuneration committee | 7,084 | 0.94 |
| NRI 2 | A non-executive/independent director serves as the N&R committee's chairman | 7,084 | 0.96 |
| NRI 3 | The N&R committee directors must comprise at least 50% of independent or non-executive directors | 7,084 | 0.95 |
| NRI 4 | At least four meetings of the N&R committee must be held each financial year | 7,084 | 0.24 |
| NRI 5 | At least two-thirds of the N&R committee directors attended the meetings | 7,084 | 0.96 |
| NRI 6 | The N&R committee is entirely comprised of non-executive/independent directors | 7,084 | 0.85 |
| NRI 7 | The board chairman should not serve as chairman of the N&R committee | 7,084 | 0.98 |
| NRI 8 | The N&R Committee Chairman attended the last AGM | 7,084 | 0.83 |
| N&R sub-index score (0–100) | 7,084 | 83.92 | |
| D. Ownership Structure Index (OINDEX) | |||
| OI 1 | Promoter ownership is present | 7,084 | 0.96 |
| OI 2 | Determine the shareholdings of domestic institutional investors (DII). Consider it one if a company's DII ownership exceeds 5% and zero otherwise | 7,084 | 0.55 |
| OI 3 | Determine the shareholdings of foreign institutional investors (FII). Consider it one if a company's FII ownership exceeds 5% and zero otherwise | 7,084 | 0.51 |
| OI 4 | Determine the shareholdings of institutional investors. Consider it one if a company's institutional investors ownership exceeds 5% and zero otherwise | 7,084 | 0.73 |
| OI 5 | Government ownership is greater than 5% | 7,084 | 0.07 |
| OI 6 | Existence of concentrated ownership | 7,084 | 0.61 |
| Ownership sub-index score (0–100) | 7,084 | 56.75 | |
| E. Disclosure Index (DINDEX) | |||
| DI 1 | Disclosure of the percentage of each director's compensation to the median employee compensation | 7,084 | 0.44 |
| DI 2 | Disclosure of financial information on compensation, particularly bonuses, and incentives awarded to directors | 7,084 | 0.90 |
| DI 3 | If the corporation makes available the non-executive directors/independent directors sitting fees for committee meetings and board meetings, as well as their compensation | 7,084 | 0.84 |
| DI 4 | The company's annual report discloses the remuneration of the CEO | 7,084 | 0.93 |
| DI 5 | The board report includes information on crucial managerial personnel appointed and resigned throughout the fiscal year | 7,084 | 0.68 |
| DI 6 | Whistle-blower policy as a mechanism for directors and employees' vigilance | 7,084 | 0.82 |
| DI 7 | There is a company policy against insider trading and a board code of conduct | 7,084 | 0.55 |
| DI 8 | The companies present a corporate social responsibility (CSR) sustainability committee | 7,084 | 0.58 |
| DI 9 | Disclosure of environmental, social, and governance (ESG) score by the Firm | 7,084 | 0.83 |
| DI 10 | Disclosure regarding global reporting initiative (GRI) Compliance | 7,084 | 0.14 |
| DI 11 | Employee stock ownership plan (ESOP) was disclosed | 7,084 | 0.20 |
| Disclosure sub-index score (0–100) | 7,084 | 62.39 | |
| CGI Score (0–100) | 7,084 | 69.49 | |
| Serial No | Description | No. | Mean |
|---|---|---|---|
| BSI 1 | If the firm's board size is 7–15, assign 1; if it is less than 7 or greater than 15, assign 0 | 7,084 | 0.81 |
| BSI 2 | The absence of chief executive officer (CEO) duality | 7,084 | 0.71 |
| BSI 3 | If non-executive directors (NEDs) serve as the board's chairman, at least one-third of the board must comprise independent directors (IDs) | 7,084 | 0.49 |
| BSI 4 | If executive directors (EDs) serve as the board's chairman, at least half of the board must comprise IDs | 7,084 | 0.36 |
| BSI 5 | There is at least one female director on the board | 7,084 | 0.98 |
| BSI 6 | Ensure that the board comprises at least 50% NEDs | 7,084 | 0.97 |
| BSI 7 | The board has evaluated its performance and the performance of its subcommittees using a code of conduct | 7,084 | 0.97 |
| BSI 8 | Former CEOs should not be board members | 7,084 | 0.43 |
| BSI 9 | A NED as the board chairman | 7,084 | 0.53 |
| BSI 10 | An ID serves as the board chairman | 7,084 | 0.16 |
| BSI 11 | The percentage of women directors on board is at least 30% | 7,084 | 0.04 |
| BSI 12 | The board of directors should include at least one promoter | 7,084 | 0.48 |
| BSI 13 | A female CEO is present on the board | 7,084 | 0.03 |
| BSI 14 | The board's chairman is a woman | 7,084 | 0.02 |
| BSI 15 | The board includes the nominee director | 7,084 | 0.16 |
| BSI 16 | At least four board meetings are held annually | 7,084 | 0.99 |
| BSI 17 | If the board chairman attended the most recent Annual General Meeting (AGM) | 7,084 | 0.86 |
| BSI 18 | At the last AGM, the CEO attended | 7,084 | 0.89 |
| BSI 19 | Less than half of all independent board directors serve on three or more boards | 7,084 | 0.72 |
| BSI 20 | CEO serves on less than three other public company boards | 7,084 | 0.88 |
| BSI 21 | The ED cannot hold directorship/chairmanship on more than three listed firms | 7,084 | 0.55 |
| BSI 22 | The NED cannot hold directorship on more than seven listed firms | 7,084 | 0.47 |
| BSI 23 | Across all companies, a director cannot be the chairman of more than five committees or a member of more than ten committees | 7,084 | 0.89 |
| BSI 24 | Board meetings must have 75% attendance, including all directors | 7,084 | 0.84 |
| BSI 25 | The report outlines an independent directors' meeting in the financial year. Ensure at least 75% attendance at independent director meetings | 7,084 | 0.80 |
| ACI 1 | There should be at least three directors on the audit committee | 7,084 | 0.99 |
| ACI 2 | The audit committee must have two-thirds independent directors | 7,084 | 0.87 |
| ACI 3 | An independent/non-executive director serves as the audit committee's chairperson | 7,084 | 0.97 |
| ACI 4 | Every financial year, the audit committee must hold at least four meetings | 7,084 | 0.98 |
| ACI 5 | The audit committee members must have attended at least 75% of the board meetings | 7,084 | 0.96 |
| ACI 6 | Less than half of audit committee directors hold directorships on three or more boards | 7,084 | 0.69 |
| ACI 7 | The audit committee should not include the CEO/managing director (MD) | 7,084 | 0.82 |
| ACI 8 | The audit committee chairman and board chairman should not be the same | 7,084 | 0.94 |
| ACI 9 | The chairman of the audit committee attends the company's last AGM | 7,084 | 0.88 |
| ACI 10 | The audit committee must be entirely consisting of NEDs | 7,084 | 0.68 |
| ACI 11 | The audit committee includes at least one person with expertise and understanding in finance or accounting | 7,084 | 0.72 |
| ACI 12 | Ensure that one of the auditors is affiliated with BIG four auditing firms | 7,084 | 0.32 |
| ACI 13 | Every five years, the audit partner should change | 7,084 | 0.85 |
| ACI 14 | Check the auditor's opinion | 7,084 | 0.97 |
| ACI 15 | The amount of consulting fees paid to auditors is lower than that of audit fees | 7,084 | 0.91 |
| NRI 1 | There should be at least three directors on the nomination and remuneration committee | 7,084 | 0.94 |
| NRI 2 | A non-executive/independent director serves as the N&R committee's chairman | 7,084 | 0.96 |
| NRI 3 | The N&R committee directors must comprise at least 50% of independent or non-executive directors | 7,084 | 0.95 |
| NRI 4 | At least four meetings of the N&R committee must be held each financial year | 7,084 | 0.24 |
| NRI 5 | At least two-thirds of the N&R committee directors attended the meetings | 7,084 | 0.96 |
| NRI 6 | The N&R committee is entirely comprised of non-executive/independent directors | 7,084 | 0.85 |
| NRI 7 | The board chairman should not serve as chairman of the N&R committee | 7,084 | 0.98 |
| NRI 8 | The N&R Committee Chairman attended the last AGM | 7,084 | 0.83 |
| OI 1 | Promoter ownership is present | 7,084 | 0.96 |
| OI 2 | Determine the shareholdings of domestic institutional investors (DII). Consider it one if a company's DII ownership exceeds 5% and zero otherwise | 7,084 | 0.55 |
| OI 3 | Determine the shareholdings of foreign institutional investors (FII). Consider it one if a company's FII ownership exceeds 5% and zero otherwise | 7,084 | 0.51 |
| OI 4 | Determine the shareholdings of institutional investors. Consider it one if a company's institutional investors ownership exceeds 5% and zero otherwise | 7,084 | 0.73 |
| OI 5 | Government ownership is greater than 5% | 7,084 | 0.07 |
| OI 6 | Existence of concentrated ownership | 7,084 | 0.61 |
| DI 1 | Disclosure of the percentage of each director's compensation to the median employee compensation | 7,084 | 0.44 |
| DI 2 | Disclosure of financial information on compensation, particularly bonuses, and incentives awarded to directors | 7,084 | 0.90 |
| DI 3 | If the corporation makes available the non-executive directors/independent directors sitting fees for committee meetings and board meetings, as well as their compensation | 7,084 | 0.84 |
| DI 4 | The company's annual report discloses the remuneration of the CEO | 7,084 | 0.93 |
| DI 5 | The board report includes information on crucial managerial personnel appointed and resigned throughout the fiscal year | 7,084 | 0.68 |
| DI 6 | Whistle-blower policy as a mechanism for directors and employees' vigilance | 7,084 | 0.82 |
| DI 7 | There is a company policy against insider trading and a board code of conduct | 7,084 | 0.55 |
| DI 8 | The companies present a corporate social responsibility (CSR) sustainability committee | 7,084 | 0.58 |
| DI 9 | Disclosure of environmental, social, and governance (ESG) score by the Firm | 7,084 | 0.83 |
| DI 10 | Disclosure regarding global reporting initiative (GRI) Compliance | 7,084 | 0.14 |
| DI 11 | Employee stock ownership plan (ESOP) was disclosed | 7,084 | 0.20 |
| CGI Score (0–100) | 7,084 | 69.49 | |
Note(s): This table provides the governance indicators used to construct the CGI, the total number of firm-year observations, and the average value for each. Data is manually collected from annual reports, CMIE’s ProwessIQ, and respective company websites. BSI is board structure indicators, ACI is audit committee indicators, NRI is nomination and remuneration indicators, OI is ownership indicators, and DI is disclosure indicators
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