Outside Directors, Corporate Governance and Firm Performance: Empirical Evidence from India

The current study examines the efficacy of outside directors on the corporate boards of 157 non-financial Indian companies for the year 2008. The research particularly investigates if the monitoring by grey director (non-executive non-independent) and independent director influences firm performance. Research finding reveals that while the proportion of grey directors on board has marginally deteriorated effect, the independent director’s proportion has an insignificant positive effect on firm value. Outcome of research has significant implications for devising a board model for companies in India that have a significant ownership concentration and insider control. Independent directors require greater representation on the board in lieu of other non-executive outside directors.