Corporate governance practices, self-dealings, and firm performance: Evidence from India

This paper investigates the effects of firm-level corporate governance practices on firm performance for publicly traded Indian firms where founder ownership is concentrated. We develop a comprehensive measure of corporate governance and show that corporate governance is positively associated with firm performance. This relationship becomes stronger when founder ownership is high. We next focus on the specific channel through which governance improves firm performance, namely self-dealing by controlling owners. We find that better governance mitigates self-dealing by controlling owners and thereby improves future firm performance. Overall, our study substantiates the key relationship between the quality of corporate governance and firm performance in the presence of founder ownership.