CHAPTER 4shodhganga.inflibnet.ac.in/bitstream/10603/12560/8/08_chapter 4.pdf · a, pi, f32, 33,...

CHAPTER 4

CORPORATE PERFORMANCE

AND GOVERNANCE

CHAFFER 4

CORPORATE PERFORMANCE AND GOVERNANCE

IN THE SELECTED INDUSTRIES IN INDIA

The current study is conducted on the BSE-500 companies. Focusing on the

objective 'To analyse corporate performance and governance in the selected

industries in India', the study utilises financial statements published in the

annual reports from 2001-02 to 2005-06 and scores of the sample companies

from the corporate governance disclosure index (CGI). This objective provides

an empirical validation of increase in corporate performance as a result of

proper corporate governance practices in the Indian context.

Measures of performance as dependent variable

This study uses financial statements from the annual reports of one hundred

and seventy companies from eight sectors as per the sample design over a

time frame of five years from 2001-02 to 2005-06 to study the financial

performance across various dimensions viz. accounting profitability and its

components. The major areas of focus are accounting-based performance

measures of profitability of a firm such as return on equity (ROE), return on

net worth (RONW), return on capital employed (ROCE) and return on assets

(ROA). These variables analyze performance from various dimensions for the

respective years for each of the sample sector.

Measures of corporate governance as independent variable

Fourteen sub-groups amounting to one hundred and ten items of disclosure,

which form a part of the corporate governance disclosure index (CGI) are

developed as the independent variables viz. companies' philosophy on code

of governance (MDCP), board of directors (MDBD), audit committee

(MDAC), risk management committee (MDRM), management committee

(MDMC), directors' committee (MDDC), remuneration committee (MDRC),

shareholders/ investors' grievance committee (MDIG), general body

165

meetings (MDGB), other disclosures (MDOD), means of communication

(MDCO), general shareholder information (MDSH), non-mandatory

disclosures (NMD), other items of disclosures (OID).

Procedure for analysis

CGI and performance variables - are analyzed and interpreted using

descriptive statistics, correlations, regression analysis and such other

statistical procedures in SPSS 11.01 software. The hypotheses is tested using

linear multiple regression techniques at 5% significance level to analyse the

relationship between corporate performance and corporate governance. To

obtain such evidence, all measures of performance are regressed on CGI

variables. To analysis this relationship various regression models are

estimated for each sector.

Estimated regression models

Model 1: ROE = a + PiMDCP + P2MDBD + P3MDAC P4MDRM +

p5mDmc + p6MDDC + p7MDRC + p8MDIG + p9MDGB +

(31oMpop piiMDCO + p12MDSH + p13NMD + p14OID + E

Model 2: RONW = a + PiMDCP + P2MDBD + P3MDAC + P4MDRM +

f35MDMC + P6MDDC + p7MDRC + P8MDIG 139MDGB +

piompop PiiMDCO + P12MDSH + p13NMD + P1401D + E

Model 3: ROCE = a + (31MDCP + P2MDBD + p3MDAC + P4MDRM +

ro5mDmc p6MDDC + p7MDRC + p8MDIG + p9MDGB +

piompop PiiMDCO + p12MDSH + P13NMD + p14OID + E

Model 4: ROA = a + PiMDCP + P2MDBD + P3MDAC + P4MDRM +

P5MDMC + P6MDDC + P7MDRC + P8MDIG + p9MDGB +

plompop PiiMDCO + Pi2MDSH + Pi3NMD + (31401D + E

166

Where,

ROE = Return on equity

RONW = Return on net worth

ROCE = Return on capital employed

ROA = Return on assets

MDCP = Companies' philosophy on code of governance

MDBD = Board of directors

MDAC = Audit committee

MDRM = Risk management committee

MDMC = Management committee

MDDC = Directors' committee

MDRC = Remuneration committee

MDIG = Shareholders/ investors' grievance committee

MDGB = General body meetings

MDOD = Other disclosures

MDCO = Means of communication

MDSH = General shareholder information

NMD = Non-mandatory disclosures

OID = Other items of disclosures

a, pi, f32, 33, 134, 135, p6, p7, P8, P9, P10, pll, P12, P13, P14 are the regression coefficients

and £ is the random term.

Summary of the hypotheses of the study

Hi: Company's philosophy on corporate governance affects performance

H2: Composition and conduct of board of directors influences performance

H3: Composition and conduct of audit committee influences performance

H4: Procedures related to risk management committee influences

performance

H5: Procedures related to management committee influences performance

H6: Procedures related to directors' committee influences performance

167

H7: Policies and procedures related to remuneration committee affects

performance

H8: Policies and procedures of investors' grievance committee affect

performance

H9: Policies and procedures related to general body meetings affects

performance

Hio: Disclosures on related party transactions and penalties affects

performance

Means of communication influences performance

Hit: General shareholder information influences performance

HD: Non-mandatory disclosures influences performance

H14: Other items of disclosures included in the annual report influences

performance

4.1 PERFORMANCE AND GOVERNANCE IN AGRICULTURE

SECTOR

The BSE-500 index constituents of December 8, 2005 have 28 companies

in the agriculture sector of which 15 are selected as per the sampling

procedure followed for the purpose of this study. The study analyses

performance and governance in this sector for five years from 2001-02

to 2005-06.

4.1.1 Descriptive statistics analysis

Table 4.1.1 presents the descriptive statistics of independent variables

in the agriculture sector for five years from 2001-02 to 2005-06 having

75 observations. The analysis reveals that variable MDBD has the

highest disclosure of 79% indicating a complete disclosure practice,

followed by variable MDSH with 74% disclosure. On the other hand,

variable MDRM has the least disclosure reflecting a near absence of

disclosure practice, followed by variables MDDC, MDMC and NMD.

168

The table also shows that the maximum total score attained is 371 and the

minimum total score is 237. A further analysis of the average total score of

280 with dispersion measured at 29.43 reveals that 68% of the companies

have a score in the range of 251 to 310 points, which is 46% to 56% disclosure,

indicating a moderate disclosure practice with an average disclosure of 51%

for the entire sector.

Table 4.1.1: Descriptive statistics of agriculture sector

Variables Notation Min. Max. Mean S.D. % Dis.

Companies' philosophy on governance MDCP 3 5 3.25 0.47 65.00

Board of directors MDBD 26 37 31.61 2.71 79.03

Audit committee MDAC 24 39 30.47 3.88 67.71

Risk management committee MDRM 6 21 6.39 1.92 21.30

Management committee MDMC 3 9 3.59 1.57 23.93

Directors' committee MDDC 3 12 3.45 1.76 23.00

Remuneration committee MDRC 12 35 21.03 5.97 52.58

Investors' grievance committee MDIG 24 42 32.99 4.73 65.98

General body meetings MDGB 8 23 12.85 3.75 42.83

Other disclosures MDOD 6 15 10.12 1.63 50.60

Means of communication MDCO 11 27 17.67 3.31 50.49

General shareholder information MDSH 44 70 55.64 5.43 74.19

Non-mandatory disclosures NMD 10 27 14.93 5.14 29.86

Other items of disclosures OID 27 61 36.45 6.54 36.45

Total score CGI 237 371 280.44 29.43 50.99

Note: N = 75

169

4.1.2 Correlation analysis

The strength of relationship between variables is measured by this

method. The independent variables are examined for multicollinearity

and the degree of tolerance in table 4.1.2a, while the dependent

variables are combined with independent variables in order to analyse

the correlation between them in table 4.1.2b.

We use Pearson's correlation coefficient to study the level of tolerance

and association between each variable. Although many variables are

reaching their 0.01 level of significant with each other, the Pearson's

correlation coefficient generally does not go beyond the scope of a

reasonable limit of 0.8 and therefore does not pose a problem for the

multiple regression models.

Table 4.1.2a shows variables MDAC and NMD are at their significant

level with almost all other variables. The highest significant level is

between variable NMD and variable MDRC and the Pearson's

correlation coefficient is 0.706.

On the contrary, variable MDCP is negatively correlated with almost

all other variables, with the highest Pearson's correlation coefficient

equal to -0.322 between variable MDCP and variable MDRC.

In table 4.1.2b, we find that dependent variable ROE is significantly

correlated with five independent variables, with the highest Pearson's

correlation coefficient equalling to 0.355 with variable NMD. Rest of

the dependent variables are not influenced by more than two

independent variables.

170

1.000 1

0.222 1 1.000 1

-0.121 1 -0.140

(0.300) 1 (0.230)

0.072 : .381**

0.541) 1 (0.001)

-0.038 1 .581**

(0.745) ! (0.000)

-0.069 : .343**

(0.557) : (0.003)

0.007 1 .518**

(0.950) : (0.000) -;

.365** .706**

(0.001) (0.000)

0.081 ; .603**

0.491) 1 (0.000)

1.000 i1

.

(

0.146 1.000

(0.211)

-0.109 1 271* 1 1.000

(0.353) I (0.019) 11

0.072 1 .432**

0.538) I (0.000) . I (p12

-0.107 1 .407** 1 .3M** ;

(0.360) i (0.000) (0.001) 1

-.241* : .325** 1 .508** :

(0.037) (0.004) ! (0.0001 1

-0.050 1 .446** 1 .648** :

(0.672) 1 (0.000) (0.000)

• 1 0.178 1 1.000

..

.645** 1.000

.273* .425** 1.000 1

(0.018) (0.000)

.431** I

557** .530** (0.000) 1 (0.000) (0.000)

: .

1 1.000

. I

: 0.049

(0.675)

I 0.137

(0.242)

1 0.129

I (0.271) 1

0.134

1 (0.251)

I .247*

1 0.049

1 (0.679)

: 0.190

(0.009)

1 (0.102)

1 0.112

1 10.338) . I

1 .240*

(0.038)

I

MDIG

MDGB

MDOD

MDCO

MDSH

NMD

ID O

MDAC

MDRM

MDMC

MDDC

MDRC

4

Table 4.1.2a: Pearson's correlation coefficients combining independent variables of agriculture sector

Variable 1 MDCP MDBD 1 MDAC 1 MDRM 1 MDMC 1 MDDC MDRC 1 MDIG I MDGB 1 MDOD MDCO MDSH NMD

MDBD -0.178 1.000 1

.. • •• - : 1 (0.128) : ..

. . . . . . .262* .376**

(0.023) (02001) -0.080 .231*

1.000

1 . 0.182 1 1.000

I (0.493) T.046) (0.118) .

-0.205 -0.041 0.043 i 0.031 1 p.077)_ (0.725) I (0.713) i (0.790) 11 -0.142 1 -0.014 .320** 1 -0.053

(1226)(O.907) 1

(0.005) (0.654) .322** 1 .469** .448** : .385**

1 (0.005) (0.000)_ (o.000) olool)

0.209 1 .424** .284* 1 -0.002 07'LI (0.000) I (0.013) I (0.984)

0.176 1 .273* .471** 1 .317**

I (0.132) I (0.018) (0.000) I (0.006)

-0.076 1 .250* ;

1 .323** 1 .300**

(0.517)

1-0.032 1 0.070 0.168 ! .258*

(0.785) 1 (0.552) (0.149) I (0.025)

-0.049 1 0.174

•339** 1 .253*

(0.003) 1. (0.029)

: -.308** ! .290* .407**

1 .287*

1 (02007) 1 (0.0121 _ 1 10.000) I (0.013)

1 0.050 1 0.202 F.

395** 1 •595** (0.668) I (0.082) (0.000) 1 (0.000)

171

MDCP MDBD MDAC MDRM MDMC MDDC MDRC MDIG MDGB MDOD MDCO MDSH

0.074 1 ROE

(0.5291 !

0.056 ! RONW

D0.636) '

0.143 ' ROCE

(0.221) !

0.118 ' ROA

(0.315)

0.134 (0.252 0.119 :

(0.309) : 0.052 I

0.657) 0.071

(0.546)

0.223 (0.054) 0.153

(0.189) 0.198

(0.089) 0.171

(0.142)

.243* p.036) .

0.033 : 1 (0.776) i i 0.119 i (0.309)

0.080 (0.496)

-0.172 (0.140) -.235* (0.042) -0.091 (0.435) -0.127 (0.279) i

-0.195 (0.094) -0.012 (0.916) , -0.079 (0.502) : -0.167 i (0.152)

.353 (0.002) 0.117

(0316) 0.089

(0.448) 0.067

(0.568) ;

0.064 (0.777) (0.586) 0.064 0.126

(0.586) (0.282) 0.212 0.058

(0.068) 4 (0.623) .236* I 0.047 .

(0.042) (0.689) 1

.277* (0.016)._

0.129 (0.269) .286*

(0.013) 1 .238* 1

(0.040)

-0.010 , -- (0.932) 1 0.170 I t

(0.144) 0.171

(0.143) 0.209 1

(0.072) '

0.079 (0.501) -0.019 . (0.8691 0.194

(0.095) 0.191

(0.101)

NMD 1 OID 1 .355** I .295* _I .- I (0.002) L(0.010) i 0.108 a -0.046 I ; (0.355) j (0.695)

0.003 1 .263* I - 4

(0,977) ___(0.023). 1 -0.036 _ 0.197 J (0.756) , (0.091)

4

Table 4.1.2b: Pearson's correlation coefficients combining dependent and independent variables of agriculture sector

Notes: ** Correlation is significant at the 0.01 level (two-tailed) * Correlation is significant at the 0.05 level (two-tailed) N = 75

172

4

4.1.3 Regression analysis

This analysis helps us to develop a statistical model that can be used to

predict the value of a dependent variable based on the values of

multiple variables. We proceed to testify the hypotheses of this study

with various multiple regression models. Table 4.1.3a summarises the

results of the four regression -models used for the purpose of this study.

The model that explains the maximum variability in the dependent

variable is selected.

Table 4.1.3a: Summary of regression models of agriculture sector

Model R R2 Adjusted- R2 F-Test Sig. Std. error

1 0.692 0.479 0.358 3.947 0.000 2.691

2 0.480 0.230 0.051 1.282 0.245 0.164

3 0.542 0.293 0.129 1.780 0.063 0.065

4 0.547 0.299 0.136 1.832 0.054 0.049

Since R2 is larger in model 1 as seen in table 4.1.3a, our final multiple

regression model is model 1. The model explains 47.9% of the

variability in the dependent variable. The regression is described in the

following model:

ROE = a + 131MDCP + 132MDBD + 133MDAC + 134MDRM + 135MDMC +

P6MDDC + f37MDRC + f38MDIG + f39MDGB + PioMDOD + f3EMDCO +

pi2mDsH p13NMD + 13.1401D + £

Company's philosophy

It is evident from table 4.1.3b that variable MDCP is significant at 5%

level, testifying our hypothesis:

Hi : Company's philosophy on corporate governance affects

performance.

Yet the analysis reveals a negative association with the performance

variable indicating that an improvement in disclosure with regard to

173

company's philosophy on governance reduces its overall monetary

gains. In other words, companies that practice corporate social

responsibility and uphold humane philosophies see a gradual

reduction in their book profit. This holds true for the agriculture sector,

which relies heavily on farmers and fertilizers and is battered by floods

and droughts. These companies adapt various rural development

schemes that benefit the farmers and thereby benefit themselves as this

sector is dominated by industries manufacturing fertilizers, sugar and

agro based by-product.

II Board of directors

Clause 49(I)(A) provides explanation on the composition and

constitution of the board. The board has an optimum combination of

executive, non-executive and independent directors. There is a limit on

chairmanship and membership of committees held by directors. This

disclosure also monitors the number of board meetings and attendance

of directors. The composition and constitution of the board provides

the atmosphere and environment required for functioning of the board.

On the other hand the policy decisions taken at board meetings

determine the performance of the company. We find evidence at 5%

level of the significance for variable MDBD in table 4.1.3b. We therefore

accept the hypothesis:

H2: Composition and conduct of board of directors influences

performance.

However this variable is negative association with performance,

although it experiences a complete disclosure practice. Results indicate

that this sector has the appropriate board structure for good

performance. Yet it suffers from unproductive meetings and

insufficient policy changes.

174

III Audit committee

The audit committee mainly performs the function of overseeing the

company's financial reporting process and the disclosure of its

financial information to ensure that the financial statements are correct,

sufficient and credible. It also makes recommendations to the board

after reviewing various reports and statements. It is therefore only

indirectly linked to performance. This has resulted in a 10% level of

significance for variable MDAC evident by the regression results in

table 4.1.3b. However, we consider only 5% significance level and

therefore reject this hypothesis:

H3: Composition and conduct of audit committee influences

performance.

IV Risk management committee

We have seen in chapter three, table 3.1.1, with regards to variable

MDRM that none of the companies follow the risk management

procedures in this sector for the years 2001-02 to 2003-04, reflecting an

absence of disclosure practice. In f.y. 2004-05 incomplete disclosure is

provided by one company. In f.y. 2005-06 disclosure is provided by 4

companies. This has proved insignificant in testifying our hypothesis:


performance.

V Management committee

The management committee consists of senior management personnel

who are members of its core management team excluding the board of

directors. This comprises of members of management one level below

the executive directors, including the functional heads. They make

disclosures to the board relating to all material, financial and

commercial transactions, where there is a personal interest, which may

have a potential conflict with the interest of the company at large

175

[clause 49(IV)(F)]. In table 4.1.3b, we find evidence of the importance of

variable MDMC at 1% level of significance. Hence we accept the

hypothesis:

H5: Procedures related to management committee influences

performance.

But the negative association clarifies the present role of the

management committee as being - unproductive. Results prove that this

disclosure is at its nascent stage and need to be developed to its full

potential. Adversely it will affect the performance and an additional

cost is incurred in accommodating such management.

VI Directors' committee

The directors' committee is constituted to consider and recommend to

the board matters regarding annual operating plans, business

restructuring proposals, acquisitions, disinvestments, business and

strategy review, long term financial projections, introduction of new

products, sale of companies' investments and raising of finance. In

table 4.1.3b, the importance of variable MDDC at 1% level of

significance is evident. Hence we accept the hypothesis:

F16 : Procedures related to directors' committee influences

performance.

But the negative association clarifies the present role of the directors'

committee as being unproductive. Results prove that this disclosure is

at its nascent stage and need to be developed to its full potential.

Adversely it will affect the performance and an additional cost is

incurred in accommodating such directors.

VII Remuneration committee

Clause 49(IV)(E) provides guidelines for the remuneration committee.

This committee formulates the remuneration policy and details of

remuneration paid to all the directors. The criteria of making payments

176

to non-executive directors and the number of shares and convertible

instruments held by them are also monitored. Policies and procedures

followed in making payments to directors influences their individual

performance and thereby the performance of companies at large.

Results in table 4.1.3b testify to the insignificance of variable MDRC,

we therefore reject the hypothesis:

H7: Policies.-and procedures related to remuneration committee

affects performance.

The main reason for this is the inadequate role played by the

remuneration committee and it needs to be developed to its full

potential.

VIII Shareholders/ investors' grievance committee

Investors rights are protected by SEBI and their grievances are

redressed. The purpose of the committee is to look into the redressal of

investors' complaints like transfer of shares, non-receipt of balance

sheet, non-receipt of declared dividend, etc. The power of share

transfer is delegated to an officer or a committee or share transfer

agent. The delegated authority attends, at least once in a fortnight, to

share transfer formalities and number of shareholders' complaints

received yet not solved to their satisfaction and the number of pending

complaints.

The procedures followed are mainly administrative in nature and have

little influence on performance. On the other hand, policies adapted

impact the attitude of shareholders and thereby the performance at

large. The regression results in table 4.1.3b provide evidence at 5%

level of the significance for variable MDIG, while it experiences a

complete disclosure practice. We therefore accept the hypothesis:

H8: Policies and procedures of shareholders/ investors' grievance

committee affect performance.

177

This indicates that this sector follows the required procedures of this

committee and has initiating policy changes that are impacting the

attitude of shareholders and thereby influencing performance.

IX General body meetings

Procedures of the general body meetings relating to information such

as location and time of last three. AGMs and the use.of postal ballots for

passing special resolutions, details of voting pattern, person

conducting the postal ballot and proposed special resolution to be

conducted through postal ballot are investigated through this

disclosure. The regression analysis in table 4.1.3b provides no evidence

of the significance of variable MDGB. The main reason for this is the

inadequate disclosure from companies towards the use of postal

ballots. Hence we reject this hypothesis:


performance.

X Related party transactions and penalties

Disclosure on materially significant related party transactions that may

have potential conflict with the interests of the company as per clause

49(IV)(A) and penalties for non-compliance imposed by SEBI or any

statutory authority, on any matter related to capital markets does not

affect performance as per variable MDOD in table 4.1.3b. The main

reason for this is the inadequate contribution from companies towards

this disclosure, causing us to reject this hypothesis:


performance.

178

XI Means of communication

The influence of means of communication such as newspapers and

websites on performance is analysed. Existing and potential

shareholders exhibit confident in the business of companies in this

sector and are therefore satisfied with current financial results and

events such as the quarterly and annual financial results, official news

releases, presentations made to institutional investors or analysts and

information furnished to any business/ market analyst. These are easily

accessible through newspapers and internet. Results in table 4.1.3b

provide evidence at 5% significance level of the role played by variable

MDCO in promoting companies to potential shareholders, creditors

and the consumers and thus influencing performance. We therefore


Hii : Means of communication influences performance.

XII General shareholder information

Information provided to the general shareholder is studied in relation

to its influence on performance. This information includes disclosures

on AGM: date, time and venue, financial year, date of book closure,

dividend payment date, listing on stock exchanges, stock code, market

price data: high, low during each month in the last financial year,

performance in comparison to broad-based indices, registrar and

transfer agents, share transfer system, distribution of shareholding,

dematerialization of shares and liquidity, outstanding GDRs/ ADRs/

warrants or any convertible instruments, conversion data and likely

impact on equity, plant locations and address for correspondence.

This disclosure is required mainly by the existing shareholders and has

been provided by the companies long before the corporate governance

norms came into existence. We therefore notice a greater contribution

by companies towards this disclosure. Aging companies have a strong

179

rt shareholder base, market base, product recognition, brand recognition

research and development, finance availability, loans from creditors

and financial institutions and government backing. Little needs to be

done in terms of wooing the shareholders, creditors and the

consumers. Shareholders are already familiar with the information

provided and therefore tend to have a laid back, taken for granted and

over confident attitude. They show poor levels of participation towards

growth and expansion of their companies. These factors contribute to

the lack of significance of variable MDSH with performance, thus

disproving our hypothesis:

Hu: General shareholder information influences performance.

XIII Non-mandatory disclosures

The non-mandatory disclosures such as benefits to non-executive

directors, specific remuneration packages for executive directors,

training provided to directors in the business model and risk profile of

business parameters, clearly defined responsibilities as directors and

peer group evaluation mechanism of their performance are factors that

influence the performance of companies. Similarly, a regime of

unqualified financial statements, mechanism for employees to report

unethical practices and direct access to the chairperson of the audit

committee are steps taken by responsible companies. Half - yearly

declaration of financial performance and summary of significant events

in the last six months being send to shareholders increases the role

played by them. These disclosures are investigated and their influence

on performance analysed and interpreted.

The regression result in table 4.1.3b provides evidence at 10% level of

significance for variable NMD. However, we consider only 5%

significance level and therefore reject this hypothesis:

H13: Non-mandatory disclosures influence performance.

180

XIV Other items included in the annual report

Other items such as the management discussion and analysis report,

certificate of compliance of code of conduct from board members,

directors, senior management personnel, brief resume of directors and

senior management personnel, pecuniary relationships and

transactions of non-executive directors, certification by the CEO and

CFO, signature of compliance officer or the chief executive officer,

quarterly compliance report submitted to stock exchange and

certificate of compliance obtained from its statutory auditor or

company secretary are all examined along with the annual report.

This variable helps us to understand the attitude of the management,

policy decisions and various strategies that impact performance. In

table 4.1.3b we find evidence at 5% level of significance of the

importance of variable OID testifying our hypothesis:

H14: Other items of disclosures included in the annual report

influences performance.

181

Table 4.1.3b: Regression results of agriculture sector

Unstandardized coefficients

Estimate of Beta Standard error

S.C.

Beta distr.

t-statistics P-value

(Constant) 12.656 6.657 1.901 0.062

MDCP -2.081* 0.954 -0.290 -2.182 0.033

MDBD -0.430* 0.185 -0.347 -2.322 0.024

MDAC 0.228. 0.127 - 0.263 1.788 0.079

MDRM -0.013 0.221 -0.007 -0.057 0.955

MDMC -0.811** 0.243 -0.379 -3.332 0.001

MDDC -0.964** 0.228 -0.504 -4.233 0.000

MDRC 0.013 0.171 0.022 0.073 0.942

MDIG 0.223* 0.100 0.314 2.238 0.029

MDGB -0.027 0.110 -0.030 -0.246 0.806

MDOD -0.103 0.291 -0.050 -0.356 0.723

MDCO 0.339* 0.145 -0.334 -2.342 0.023

MDSH -0.015 0.093 -0.025 -0.167 0.868

NMD 0.321 0.171 0.492 1.884 0.064

OID 0.184* 0.094 0.358 1.965 0.054

Notes:

** Test for significance at the 0.01 level (two-tailed)

* Test for significance at the 0.05 level (two-tailed)

N = 75

S.C.: Standard coefficients

182

4.2 PERFORMANCE AND GOVERNANCE IN CAPITAL GOODS

SECTOR


in the capital goods sector of which 21 are selected as per the sampling

procedure followed in this study. The study analyses performance and

governance in this sector for five years from 2001-02 to 2005-06.



in the capital goods sector for five years from 2001-02 to 2005-06 having

105 observations. The analysis reveals that variable MDSH has the

highest disclosure of 79% and variable MDBD with 76%, indicate a

complete disclosure practice. Contrary, variables MDMC and MDDC,

having the least disclosure reflect a total absence of disclosure, while

variables MDRM and NMD indicate a near absence of disclosure.

Table 4.2.1: Descriptive statistics of capital goods sector
















Total score CGI 232 352 279.11 24.14 50.75

Note: N = 105 - 4--

183


minimum total score is 232. A further analysis of the average total score of 279

with dispersion measured at 24.14 reveals that 68% of the companies have a

score in the range of 255 to 303 points, which is 46% to 55% disclosure,

indicating a moderate disclosure practice. Only 5% of the companies have a

score above 328 to 352 i.e. 60% to 64% disclosure. This results in an average

disclosure of 51% for the entire sector.













Table 4.2.2a shows variable MDRC is at its significant level with almost

all other variables. The highest significant level is between variable

MDRC and variable MDAC and the Pearson's correlation coefficient is

0.660. In table 4.2.2b, we find that dependent variable ROE is

significantly correlated with six independent variables, with the

highest Pearson's correlation coefficient equalling to 0.270 with

variable MDAC. Rest of the dependent variables are not influenced by

more than two independent variables.

184

Table 4.2.2a: Pearson's correlation coefficients combining independent variables of capital goods sector

1 Variable I MDCP i MDBD I MDAC I MDRM i MDRC I MDIG 1 MDGB I MDOD ii MDCO : MDSH I NMD

I i

1 , i MDBD

I F 1 (0.001) 1 . 1 : ---:

. 1 MDAC 0.143 1 .543** 1 1.000 1 1

: 1 , 1

1 (0.146) I (0.000) 1 I

MDRM -0.025 1 0.020 1 -0.036 1 1.000 1 1 I _1i

I : 1

i (0.800) 1 (0.839) 1 (0.717 I 1 0.063 1 .502** 1 .660** 1 .255** 1 1.000 1 4! MDRC

I 1 (0.523) 1 0.000) 1 (0.000) 1 (0.009) : :

1 MDIG 1 .383** 1 .766** 1 .531** 1 -0.116 1 .416** 1 1.000 .I : . . : 1 : .

: 1 (0.000) 1 (0.000) 1 (0.000) 1 (0.238) 1 (0.000)

mDGB ! 0.172 1 0.131 1 0.135 1 -0.047 1 0.159 1 0.106 1 1.000 (0.079) 1 (0.182) 1 (0.170) 1 (0.637) 1 (0.105) 1 (0.281)

MDOD 0.059 1 -0.049 1 0.067 1 .401** 1 .363** 1 -0.174 1 .238* 1 1.000 : : : --t : : .

I' 1 _I (0.549) i (ç0.618) 1 (0.497) 1 (0 000) 1 (0 000) 1 (0.07a 1(0.014)

MDCO -0.066 1 .211* 1 .409** 1 0.141 1 A58** 1 -0.072 1 0.036 1 .370** 1 1.000 1

1

1 (0.504) (0.031) 1 (0.000) 1 (0.151) 1 (0.000) 1 (0.465) 1 (0.717) 1 (0.000) : 1 288** 1 0.153 1 0.085 1 0.134 1 .311** 1 .217* j .245* 1 0.102 1 0.072 1 1.000 I I M DSH :

1 - I (0.003) I (0.118) 1 (0.388) 1 (0.17_2) 1 (9.001) 1 (0 026) (0.012) J, (0.303) 1 (0A64) •,

1 NMD -0.152 1 0.061 1 0.067 1 .437** 1 488** 1 0.005 1 -0.034 1 .489** 1 .207* 1 -0.130 1 1.000 ! (0.12114_(0.540) 1 (0.500) 1 (0.000) 1 (0.000) (0.962) 1_(O.734) 1 (0.000) .1 (0.034) I (0.185)1 0.187 1 .213* 1 0.188 1 464** 1 .420** 1 0.185 1 0.153 1 .582** 1 .343** 1 .274** L.368** 1 OID :

1 (0.057) 1 (0.029) 1 (0.055) 1 (0.000) 1 (0.000) 1 (0.059) 1 (0.119) 1 (0.000) 1 (0.000) 1 (0.005) 1 (0.000)

185

Variable 1 MDCP

ROE 1

RONVV

ROCE 1

ROA 1

.203* (0.037)

0- .057 (0.566) 0.065

(0.513) 0149 1

1 (0.130) 1

0.191 (0.052) -0.018 0.855) -0.042

(9.671) -0.011 (0.908)

MDAC MDRM .270** -0.012 (0.005) (0.902) 0.029 0.163

(0.096 0.111

(0.771) 0.038

(0.703) 0.095

MDRC MDIG MDGB MDOD ! MDCO MDSH NMD 1 OID .223* 0.153 0.079 0.165 .218* .212* -0.019 T .205*

(0.022) (0.119) (0.423) (0.093) 0.026 (0.030)_ _10:849110.0361 0.073 -0.068 -0.162 -0.029 0.089 -0.057 0.131 0.072

(0.460) (0.492) (0.098) 0.7691 0.366) (0.566) i (.0.181) I (0.463)_ 1 0.137 -.223* -0.180 0.144 .291** 0.062 j 0.029 1 .260**

(0.163) , (0.022) (0.065) 1 (0.141) 1 (0.003) 1 0.532) 10.768) 0.0n 1 0.182 -0.171 -0.085 .210* 1 0.154 0.032 0.084 I .216*

1 (0.063) 1 (0.081) (0.389) 1 (0.032) 1 (0.116) (0.744) 1 (0.394) 1 (0.027) 1

MDBD

ip

Table 4.2.2b: Pearson's correlation coefficients combining dependent and independent variables of capital goods sector

Notes: ** Correlation is significant at the 0.01 level (two-tailed) * Correlation is significant at the 0.05 level (two-tailed) Correlation of MDMC and MDDC cannot be computed because these variables have constant values that reflect an absence of disclosure and hence deleted from this table. N = 105

186

•

•






results of the four regression models used for the purpose of this study.



Table 4.2.3a: Summary of regression models of capital goods sector


1 0.404 0.163 0.054 1.492 0.141 8.092

2 0.299 0.090 , -0.029 0.755 0.695 0.187

3 0.560 0.314 0.224 3.503 0.000 0.105

4 0.503 0.253 0.155 2.592 0.005 0.058



variability in the dependent variable. As seen in table 4.2.1 earlier,

there is an absence of disclosure with regard to variables MDMC and

MDDC in the capital goods sector thereby being constants or have

missing correlations. These variables are therefore deleted from the

current analysis. The regression is described in the following modified

model:

ROCE = a + 131MDCP + 132MDBD + 133MDAC + 134MDRM + 135MDRC +

136MDIG + I37MDGB + 138MDOD + 139MDCO + 1310MDSH + 13111\1MD +

pi2oiD £

I Company's philosophy

Companies in this sector are mainly public sector undertakings which

lay emphasis on the welfare of employees for smooth functioning of its

187

day to day activities. Thus the company's philosophy on governance

causes an increase in performance. Table 4.2.3b provides evidence at

10% level of significance for variable MDCP. However, we consider

only 5% significance level and therefore reject this hypothesis:


performance.


This sector is dominated by public sector undertakings (PSU). The

boards of PSU companies are very unsteady. The criteria of

independent directors are fulfilled by nominee directors. The boards

are subject to regular retirement of directors by rotations and depend

on the government of India for fresh recruitments. The board members

have a short tenure and board positions remain vacant for three to four

months in a year. This reduces the performance of these boards which

is evident from table 4.2.3b showing no significance for variable

MDBD, disproving the hypothesis:


performance.

III Audit committee






indirectly linked to performance. This becomes even more evident by

the regression results in table 4.2.3b showing no significance at all

towards variable MDAC. We therefore reject the hypothesis:


performance.

188


We have seen in chapter three, table 3.2.1, with regards to variable

MDRM that only one company has provided disclosure for the years

2001-02 to 2004-05. Rest of the companies does not follow the risk

management procedures in this sector for these four years. In f.y. 2005-

06 disclosure is provided by 5 companies. This has proved insignificant

in testifying our hypothesis:


performance.


There is a total absence of disclosure with regard to variable MDMC

(table 4.2.1), thereby being constant or have missing correlation. This

variable is therefore deleted from the current regression analysis

model, disproving our hypothesis:


performance.


The variable MDDC also presents a total absence of disclosure as seen

in table 4.2.1, thereby being constant or have missing correlation. It is

therefore deleted from the current regression analysis model,


H6: Procedures related to directors' committee influences

performance.






189




Results in table 4.2.3b testify to the importance of variable MDRC at

10% level of significance, but since we consider only 5% significance

level we reject this hypothesis:

H7: Policies and procedures related to remuneration committee



Investors rights are - protected by SEBI and their grievances are








complaints.





level of the significance for variable MDIG. We therefore accept the

hypothesis:




although it experiences a complete disclosure practice. This indicates

that this sector follows the required procedures of this committee and

190

-dr

is initiating policy changes. But these changes are yet to impact the

attitude of shareholders as they are initiated only during the latter part

of this study.



as location and time of last three AGMs and the use of postal ballots for




disclosure. The regression analysis in table 4.2.3b provides evidence at

1% level of significance for variable MDGB. Hence we accept this

hypothesis:


performance.

However this variable is negative association with performance. This

sector follows the required procedures and is initiating appropriate

policies relating to postal ballots. But these changes are yet to impact

the attitude of shareholders as they are initiated only during the latter

part of this study.










performance.

191




shareholders exhibit confident in the business of companies and are

therefore satisfied with current financial results and events such as the

quarterly and annual financial results, official -news releases,

presentations made to institutional investors or analysts and

information furnished to any business/market analyst. These are easily

accessible through newspapers and internet.

On the other hand, the capital goods sector is dominated by public

sector undertakings, with the government of India having major

shareholdings. The shareholding pattern is not impacted by this

disclosure, nor is the performance as proved by the results in table

4.2.3b showing a lack of significance for variable MDCO, thus


Means of communication influences performance.












192





shareholder base, market base, product recognition, brand recognition










F112: General shareholder information influences performance.















193

The regression result in table 4.2.3b provides no evidence of the

significance for variable NMD. The main reason for this is the

inadequate contribution from companies towards disclosure of training

to directors, their clearly defined responsibilities and peer group

evaluation mechanism of their performance, a regime of unqualified

financial statements and mechanism for employees to report-unethical

practices. Hence we reject this hypothesis:
















Hi4: Other items of disclosures included in the annual report


194

Table 4.2.3b: Regression results of capital goods sector



S.C.

Beta distr.


(Constant) 0.546 0.257 2.127 0.036

MDCP 0.033 0.017 0.198 1.938 0.056

MDBD 0.007 0.006 0.163 1.051 0.296

MDAC 0.000 0.003 0.005 0.035 0.972

MDRM -0.010 0.010 -0.116 -1.052 0.296

MDRC 0.008 0.005 0.312 1.737 0.086

MDIG -0.022** 0.006 -0.635 -3.580 0.001

MDGB -0.007** 0.003 -0.249 -2.619 0.010

MDOD -0.014 0.011 -0.159 -1.198 0.234

MDCO 0.002 0.005 0.057 0.468 0.641

MDSH -0.001 0.004 -0.018 -0.155 0.877

NMD -0.004 0.004 -0.140 -1.033 0.304

OID 0.007** 0.002 0.395 3.104 0.003

Notes:



N = 105


195

4.3 PERFORMANCE AND GOVERNANCE IN CHEMICAL &

PETROCHEMICAL SECTOR


in the chemical & petrochemical sector of which 22 are selected as per

the sampling procedure followed for the purpose of this study. The

.study analyses performance and governance in this .sector for five

years from 2001-02 to 2005-06.



in the chemical & petrochemical sector for five years from 2001-02 to

2005-06 having 110 observations. The analysis reveal that variables

MDBD, MDSH, MDIG and MDCP have above 80% disclosure

indicating an outstanding disclosure practice, followed by variable

MDAC with 79% disclosure. On the other hand, variables MDRM and

MDDC, having the least disclosure, reflect a total absence of disclosure,

while variable MDMC indicates a near absence of disclosure practice

followed by variable NMD.

The table also shows that the maximum total score attained is 354 and

the minimum total score is 281. A further analysis of the average total

score of 312 with dispersion measured at 12.57 reveals that 68% of the

A companies have a score in the range of 299 to 325 points, which is 54%

to 59% disclosure, indicating a moderate disclosure practice. Only 5%

of the companies have a score above 337 to 354 i.e. 61% to 64%

disclosure. This results in an average disclosure of 57% for the entire

sector.

196

Table 4.3.1: Descriptive statistics of chemical & petrochemical sector
















Total score CGI 281 354 312.15 12.57 56.75

Note: N =110

197

4






- the correlation between-them in table 4.3.2b.







Table 4.3.2a shows the highest significant level is between variable

MDAC and variable MDSH and the Pearson's correlated coefficient is

0.403. On the contrary, variable MDBD and variable MDMC are

negatively correlated, with a Pearson's correlation coefficient equalling

to -0.476.


correlated with three independent variables, with the highest Pearson's

correlation coefficient equal to 0.452 with variable MDCO, while

dependent variable RONW is negatively correlated with almost all

other variables, with the highest Pearson's correlation coefficient equal

to -0.381 between variable RONW and variable MDRC. Rest of the

dependent variables are not influenced by more than one independent

variable.

198

MDBD 0 .096 1.000

110320)

MDAC 0.041 .271**

0.674) 0.004

MDMC -0.058 -.476** ; -.217*

0.548) (0.000) (0.023)

MDRC .325** 0.118 1 .313** -0.113 1 1.000

Table 4.3.2a: Pearson's correlation coefficients combining independent variables of chemical & petrochemical sector

Variable MDCP I MDBD MDAC MDMC MDRC MDIG I MDGB MDOD 1 MDCO 1 MDSH NMD

i .

(0.000) .. 44. 1 (0.116) 1 0.334y i (0.028) 1 . .195* 1 .278** 1 -0.160 1 0.130 1 0.160 1 1.000 1'

(0.041) 1 (0.003) 0.094) 1 (0.175) 1 4(0.094) 1 .... ., ......... ., ..._ . 0.076 1 0.112 0.108 1 0.088 1 .220* 1 0.141 1 1.000

: --- (0.428) 1 (0.24 43) (0.263) 1 (0.362) 1 (0.021)

i

(0.141) 1 . -0.005 1 0.065 0.164 0.060 1 0.086 0.128 1 .364**

MDIG

0.018 0.065 0.104 -0.069 1 .242* 1 1.000 I

-0.089 -0.052 1

0.135 0.061 1 0.162 1 -0.043 -0.018 -0.143 0.110 1 1.000 MDOD 1 (0.159) (0.524) (0.090) (0.655) (0.850) I (0.137) (0.253) 1

.309** -0.132 0.184 0.109 .338** 1 -0.151 0.093 1 .209* 1.000 MDCO 0.001) (0,168) S0.055) (0.258) 0.161 0.050 .403** -0.028

MDSH (0.0931 (0.604) 4(0.000 (0.771j

1 -0.015 -0.001 1 .210* 0.007 NMD ;

1 (0.880) i 4 (0.989) 1 (0.027) _(0.944)

OID .225* 1 0.088 0.052 1 -0.005

199

0.104 1 0.052 (0.282) ri (0.590) -0.107 -0.055 (0.264) I (0.567) 0.002 r .208*

(0.987) (0,029) -0.026 L 0.102 (0.788) I (0.289)

Table 4.3.2b: Pearson's correlation coefficients combining dependent and independent variables of chemical & petrochemical sector

Variable 1 MDCP 1 MDBD 1 MDAC 1 MDMC 1 MDRC MDIG 1 MDGB MDOD 1 MDCO 1 MDSH 1 NMD 1 OID

ROE 't---- °.°94 i > ; -.360** -.210* ' -0.1310.056 : : -0.079 : 0.064 : 0.119 • .45r* [ 0.020 (0.326) I (0.000) i (0.028) (0.172) : (0.559) I (0.411) 1 (0.506) , (0.214) I (0.000) 1 ..(0.839)

-- RONW -0.088 I -.208* I -.234* I 0.083 . -.381** : -0.148 I -0.075 1 -0.177 : -0.005 I -0.120 1 (0.363) 1 (0.029) I (0.014) : (0.389) I (0.000) I (0.122) : (0.434) : (0.064) I (0.958) (0.214)

ROCE - 0.017 1 0.153 i -0.050 I -0.095 : -0.137 -0.084 : 0.049 : -0.053 I -0.059 1 0.139 ! (0.861) I (0.111) ! (0.607) I (0.325) 1_(0.154) (0.381) (0.608) (0.579) _(0.544) : (0.147) I -0.040 : 0.162 -0.098 i -0.100 . -0.139 : -0.154 : -0.022 • -0.035 : -0.067 1 0.115 • (0.677) I (0.090) I (0.310) 1 (0.299) I (0.147) I (0.108) 1 (0.819) I (0.714) 1 (0.484) 1 (0.233)

ROA

Notes: ** Correlation is significant at the 0.01 level (two-tailed) * Correlation is significant at the 0.05 level (two-tailed) Correlation of MDRM and MDDC cannot be computed because these variables have constant values that reflect an absence of disclosure and hence deleted from this table. N = 110

200









Table 4.3.3a: Summary of regression models of chemical & petrochemical sector


1 0.718 0.515 0.455 8.594 0.000 2.254

2 0.505 0.255 0.163 2.772 0.003 0.139

3 0.395 0.156 0.052 1.495 0.139 0.082

4 0.395 0.156 0.052 1.495 0.139 0.058




there is an absence of disclosure with regard to variables MDRM and

MDDC in the chemical & petrochemical sector thereby being constants

or have missing correlations. These variables are therefore deleted

from the current analysis. The regression is described in the following

modified model:

ROE = a + piMDCP + 132MDBD + 133MDAC + 134MDMC + 135MDRC +

p6mDic 137MDGB + 138MDOD + 139MDCO + p10MDSH + 13111\IMD +

pi2oiD E

201


Companies while providing disclosure on their philosophy of

governance, explains it as an abstract term applicable to companies

other than themselves. They disclose their understanding of

governance by quoting various definitions of the same. They fail to

-disclose the efforts and steps they would undertake to provide good

governance. Although, these abstract philosophies increase their

disclosure scores, it fails to impact performance as seen in table 4.3.3b

that shows a lack of significance for variable MDCP. We therefore

reject this hypothesis:


performance.














performance.


although it experiences a complete disclosure practice. Results indicate

that this sector has the appropriate board structure for good

202

performance. Yet it suffers from unproductive meetings and

insufficient policy changes.

III Audit committee






indirectly linked to performance.

This sector adapted the corporate governance initiatives that began in

India in 1998 with the 'desirable code of corporate governance'; a

voluntary code published by the confederation of Indian industries

(CII) and the current practice is a mandatory adoption of the same

under the initiative of SEBI. Hence assessing performance against the

audit committee in this sector is one step ahead than other sectors and

is testified by the regression results in table 4.3.3b indicating 1%

significance level towards variable MDAC. We therefore accept the

hypothesis:


performance.

On the other hand the concept of 'audit committee performance

measurement' is still in its infancy. The only methods of assessments

currently available are: agreed charter vs. actual achievement,

subjective assessment, measure of impact, feedbacks and productivity

of issues discussed. It is very challenging for audit committees to

provide valuable guidance to the corporate world, accurate and fair

financial reporting and ensuring compliance. This nature of infancy is

ascertained by the negative association.

203

-4( IV Risk management committee

There is a total absence of disclosure with regard to variable MDRM




H4: --Procedures related to risk management committee influences

performance.











hypothesis:


performance.


management committee as being unproductive. Results prove that this




204


The variable MDDC presents a total absence of disclosure as seen in

table 4.3.1, thereby being constant or have missing correlation. It is




performance.















potential.








205



complaints.




large. The regression results in table 4.3.3b provide no evidence of the

significance of variable MDIG although this variable experiences a

complete disclosure practice. We therefore reject the hypothesis:




committee but fails to have policies that impact the attitude of

shareholders.












performance.

206






affect performance as per Variable MDOD in table 4.3.3b. The main


this disclosure. In chapter three, table 3.3.1, we find that there is an

average or moderate disclosure for two items and an absence of

disclosure is noticed for the rest two items in this category, causing us

to reject this hypothesis:


performance.















207












This disclosure is required mainly by the existing sharehOlders and has














H12: General shareholder information influences performance.

208






_peer group evaluation-mechanism of their performance are factors that














financial statements and mechanism for employees to report unethical


Hi3: Non-mandatory disclosures influence performance.








209





policy decisions and various strategies that impact performance. Table

4.3.3b provides no evidence of the significance for variable OID. The

main reason for this is the inadequate contribution from companies

towards disclosure on various certificates of compliance. Hence we




Table 4.3.313: Regression results of chemical & petrochemical sector



S.C.

Beta distr.


(Constant) 24.454 11.476 2.131 0.036

MDCP -0.205 0.290 -0.058 -0.707 0.481

MDBD -0.823** 0.160 -0.435 -5.157 0.000

MDAC -0.395** 0.106 -0.324 -3.728 0.000

MDMC -0.750** 0.133 -0.463 -5.641 0.000

MDRC -0.011 0.112 -0.009 -0.102 0.919

MDIG 0.026 0.161 0.013 0.164 0.870

MDGB -0.018 0.051 -0.027 -0.357 0.722

MDOD 0.377 0.382 0.074 0.987 0.326

MDCO 0.760** 0.134 0.492 5.670 0.000

MDSH 0.111 0.152 0.062 0.730 0.467

NMD 0.048 0.120 0.032 0.396 0.693

OID 0.025 0.036 0.055 0.684 0.496

Notes:



N =110


210

4.4 PERFORMANCE AND GOVERNANCE IN FINANCE SECTOR


in the finance sector of which 29 are selected as per the sampling

procedure followed for the purpose of this study. The study analyses

performance and governance in this sector for five years from 2001-02

to 2005-06.



in the finance sector for five years from 2001-02 to 2005-06 having 145

observations. The analysis reveals that variable MDCP has the highest

disclosure of 79% indicating a complete disclosure practice, followed

by variable MDBD with 78% disclosure. On the other hand, variable

NMD having the least disclosure indicates a near absence of disclosure

practice followed by variables MDDC, OID and MDRC.

Table 4.4.1: Descriptive statistics of finance sector
















Total score CGI 224 349 272.06 30.85 49.47

Note: N = 145

211

•





indicating a moderate disclosure practice. Only 5% of the companies have a

score above 334 to 349 i.e. 61% to 63% disclosure. This results in an average

discloSure of 49% for the entire sector.






the correlation between them in table 4.4.2b. Although many variables

are reaching their 0.01 level of significant, the Pearson's correlation

coefficient generally does not go beyond the scope of a reasonable limit

of 0.8 and therefore does not pose a problem for the multiple

regression models.

Table 4.4.2a shows variables MDBD, MDRM and MDIG are at their

significant level with almost all other variables. The highest significant

level is between variable MDIG and variable MDSH and the Pearson's

correlation coefficient is 0.671. Variable MDIG is also reaching the

significant level with variable MDBD, with a Pearson's correlation

coefficient equal to 0.658. In table 4.4.2b, we find that all dependent

variables are significantly correlated with almost all independent

variables, with the highest Pearson's correlation coefficient equalling to

0.355 between dependent variable ROE and independent variable

MDRM. On the contrary, dependent variable ROA is negatively

correlated with independent variable MDRM, with a Pearson's

correlation coefficient of -0.287.

212

1?'

Table 4.4.2a: Pearson's correlation coefficients combining independent variables of finance sector

MDRM MDMC MDDC MDRC MDIG MDGB MDOD MDCO MDSH NMD

MDDC ' -0.058 I 0.010 1 0.079 1 0.009 -0.142 1.000 (0.490) 1 (0.909) ; (0.344) (0.912) 1 (0.088) -0.032 I .203* 1 -0.075 1 -.304** 1 -0.127 I .390** ' 1.000 MDRC 1--

(0.701) _1 (0.014) I (0.370) I (0.000) 1 (0.127) (0,0001 i -0.148 1 .658** 1 .542** .543** 1 .277** 0.088 -0.109 1.000 MDIG : 4 --..-

1 1 (0.0751 i ...(0.000) I ..(0.000) (0.000);(0.001)(0.295) : (0.1931 1 I -0.089 : .548** 1 .298** .238** 0.016 : .372** .474** : 1.000000 MDGB 1 0.135

(0.286 (0.000) 1 (0.000) 1 (0.004) I (0.105) (0.851) 1 (0.000) (0.000) -0.094 1 .346** 1 .293** 1 .225** 1 .170* .177* 0.161 .417** I .401** MDOD : I (0.261) I (0.000) I (0.000) [ (0.007) (0.040) (0.034) (0.053) (0.000).. j (0.000) 1 .

0.123 1 .239** I .342** I .336** 1 0.035 .355** 0.113 .458** 1 .286** I .339** i 1.000 MDCO

(0.141E (0.004) I (0.000) I (0.000) I (0.680) (0.000) (0.177) 1 (0.000) (0.000) (0.000) 1-. MDSH -.279** 1 .624** . .541** ' .312** ' 0.028 0.122 0.035 i .671** : .515** I .245** .364** I 1.000

: - : (0.001) 1 (0.000) [ (0.000) [ (0.000) L (0.736) _ (0.145) (0.6 0.000) : (0.000) I(0.003) (0.000) . 0.143 I .254** 1 .252** .276** 1 .307** .178* .367** .249** 1 .229** 1 .422** .271" I 0.071 1 1.000 NMD .4

(0.086) i (0.002) (0.002) (0.001) I (0.000) (0.032) (0.000) (0.003) ' (0.006) (0.000) (0.001) I (0.395) H • __I 01M 241** 241** 271** 0.055 238** .190* 0.136 0.131 349** , 351** 0.154 1 591**

Variable I MDCP MDBD MDAC 376** 1.000 MDBD ;

(0.000)

MDAC -0.089 434** 1.000 (0.285) 1 (0.000)

MDRM 0.112 1 .290** .417** 1.000 : (0.182L I (0.000) (0.000)

MDMC 0.103 1 0.091 0.081 : .563**

10.216) I (0.278) (0.335) (0.000)

1.000 1

OID (0.070) (0.004) (0.003) (0.001) (0.509) (0.004) (0.022) (0.103) (0.115) (0.000) (0.000) 1 (0.065) I (0.000) I

.1

213

Table 4.4.2b: Pearson's correlation coefficients combining dependent and independent variables of finance sector

Variable MDCP MDBD MDAC MDRM MDMC MDDC MDRC MDIG MDGB I MDOD I MDCO MDSH 1 NMD OID ,

ROE .165* 0.072 i 0.159 4' .355** .172* -0.119 I -0.108 0.107 -0.010 ' -0.054 1 0.084 1 .198* 1 0.064 .189*

-- H i --i

!__(0048) I (0.387) 1 0.056) i (0.000) _(0.038) (0.153) 1 (0.196) (0.202) (0.902) (0.522) I (0.318) 1 (0.017) I (0A46) .10.023)

_ __

0.059 1 -.243** 1 -0.128 I 0.017 : 0.073 0.035 1 -.330** -0.069 -.254** : -.231** -.197* -.199* I -.237** 1 -.222** 1 RONW ; : : , ; 1---

(0.480) I (0.003) I (0.125) I (0.839 (0.383)_ (0.678) (0.000) ! (0.410) I (0.0M I (0.005) (0.018) (0.016) L(0.004) 1_0.007)

ROCS F

-.246** 1 .213* : 0.011 ) -.288** -.263** -0.141 : 0.128 : -.163* ! 0.050 I 0.028 1 0.073 .200* 1 -0.060 I .176* I

L(0.003)_41 _0.010) I (0_894) i (0.000) - 0.001) 0.090) (0.126) i (0.050 I 1(0.549 (0.743 1 (a384 I . 9.016) 1 0.471 I(0.031) II

ROA . 245** 1 .214** 0.010 1 -.287** -.260** -0.139 0.127 1 -0.162 I 0.054 i 0.029 i 0.081 I. .199* 1 -0.065 1 .175* __i 4

I (0.003) I (0.010) (0.910) ; (0.000) I (0.002) (0.095) (0.128) 1 (0.051) ! (0.517) (0.730) I (0.331) 1 (0.016) I (0.440) (0.035) Notes: ** Correlation is significant at the 0.01 level (two-tailed) * Correlation is significant at the 0.05 level (two-tailed) N = 145

214

4







The_model that explains the maximum variability in the dependent


Table 4.4.3a: Summary of regression models of finance sector


1 0.517 0.267 0.188 3.382 0.000 3.945

2 0.516 0.266 0.187 3.367 0.000 0.164

3 0.687 0.472 0.415 8.300 0.000 0.027

4 0.689 0.474 0.418 8.374 0.000 0.025




following model:

ROA = a + P1MDCP + p2MDBD + P3MDAC + P4MDRM + p5MDMC +

p6mDpc (32mDRC P8MDIG + P9MDGB + PioMDOD + piiMDCO +

P12MDSH + P13NMD + 3i4OID + E


Table 4.4.3b provides evidence at 10% level of significance for variable

MDCP. However, we consider only 5% significance level and therefore


Hi: Company's philosophy on corporate governance affects

performance.

215

4-

Ar-

Yet it is worth noting that there is a negative association with the

performance variable as revealed by the analysis. In other words,

company's philosophy on governance reduces its overall monetary

gains. Companies that practice corporate social responsibility and

uphold humane philosophies see a gradual reduction in their book

profit. This holds true for the finance sector, which widely promotes

various_ rural development schemes such as rural banking, rural

education and various loan schemes for the welfare of farmers.














performance.

This variable experiences a complete disclosure practice. Results

indicate that this sector has the appropriate board structure, productive

meetings and sufficient policy changes causing increase in

performance.

216

III Audit committee






indirectly linked to performance. This becomes even mbr& evident by




performance.


Risk management is relevant for mitigating the effects of various risks

arising from operations, management, industry, services, market,

politics, credit, liquidity, disaster, systems, legal matters, frauds, thefts,

claims or professional negligence. These may be in the nature of

financial, non-financial, insurable, transferable, retainable, avoidable

and non-avoidable risks. Unmanaged business risks have several

consequences such as shareholders wealth erosion and lack of viability

and goodwill. The basic procedures in management of risks are

identification, assessment and control. The importance of variable

)1-

MDRM at 1% level of significance is evident from table 4.4.3b. Hence

we accept the hypothesis:


performance.

However it has a negative association with the performance variable

indicating that improper management has resulted in time wastage

and financial losses.

217


The management committee is constituted in pursuance of clause 13 of

nationalised banks (management & miscellaneous provisions) scheme,

1980, read with the directives of the ministry of finance, Government of

India. It exercises such powers as may be delegated by the board with

the approval of central government and concurrence of Reserve Bank

of India. The powers vested in it by the board include financial

sanctions, approval for introduction of new deposit schemes, sanction

of limits whether fund based or non fund based, compromises/ write

off, sanction of capital and revenue expenditure, premises,

investments, donations etc. Yet table 4.4.3b, does not provide evidence

of the importance of variable MDMC. Hence we reject the hypothesis:


performance.

This clarifies the present role of the management committee as being

unproductive. Results prove that this disclosure is at its nascent stage

and need to be developed to its full potential.


The directors' committee provide approvals for loans above certain

stipulated limits, discuss strategic issues in relation to credit policy,

deliberate on the quality of the credit portfolio, sanction expenditures

above certain stipulated limits, approve expansion of the banks'

network, review investment strategy and approve investment related

proposals above certain limits. In table 4.4.3b, the importance of

variable MDDC at 1% level of significance is evident. Hence we accept

the hypothesis:


performance.



218


















potential.










complaints.

219






hypothesis:








of this study.












performance.




220







performance.










provide evidente at 1% significance level of the role played by variable




Hu: Means of communication influences performance.









14̂

221

•••







by companies towards this disclosure. Shareholders of aging

companies show poor levels of participation towards growth and

expansion of their companies. On the other hand, companies

undergoing expansion, globalisation and transformation benefit from

this disclosure. This sector has been experiencing a tremendous growth

in terms of number of branches, customer size, nature of services and

market awareness. The shareholders, potential shareholders, creditors

and the consumers of these companies are impacted by this disclosure.

They analyse this information more closely and are more critical,

pushing the performance level even higher, thereby influencing

performance. This is evident from table 4.4.3b testifying to 1% level of

significance of variable MDSH, thus proving our hypothesis:












222

4-





The regression result in table 4.4.3b provides no evidence of the .

. . . significance for variable NMD. The main reason for this is the























223

Table 4.4.3b: Regression results of finance sector



S.C.

Beta distr.


(Constant) -0.050 0.030 -1.698 0.092

MDCP -0.006 0.003 -0.150 -1.926 0.056

MDBD 0.003** 0.001 0.348 3.087 0.002

MDAC - 0.000 0.000 -0.014 -0.164 0.870

MDRM -0.002** 0.001 -0.302 -2.856 0.005

MDMC 0.000 0.001 0.015 0.167 0.867

MDDC -0.003** 0.001 -0.287 -3.452 0.001

MDRC 0.000 0.001 -0.033 -0.314 0.754

MDIG -0.004** 0.001 -0.620 -4.867 0.000

MDGB -0.001 0.001 -0.089 -0.917 0.361

MDOD 0.002 0.002 0.071 0.880 0.381

MDCO 0.004** 0.001 0.320 3.814 0.000

MDSH 0.002** 0.000 0.376 3.592 0.000

NMD -0.001 0.001 -0.089 -0.895 0.373

OID 0.002** 0.001 0.227 2.473 0.015

Notes:



N = 145


224

4.5 PERFORMANCE AND GOVERNANCE IN INFORMATION

TECHNOLOGY SECTOR


in the information technology sector of which 21 are selected as per the

sampling procedure followed in this study. The study analyses

performance and governance for five years from 2001-02 to 2005-06.



in the information technology sector from 2001-02 to 2005-06 having

105 observations. The analysis reveal that variables' MDIG, MDSH,

MDBD, MDAC and MDCP have above 80% disclosure indicating an

outstanding disclosure practice, followed by variable MDCO with 75%

disclosure. Variable MDRM having the least disclosure reflects a total

absence of disclosure, while variables MDDC, MDMC and NMD

indicate an incomplete disclosure.

Table 4.5.1: Descriptive statistics of information technology sector
















Total score CGI 312 444 348.55 25.86 63.37

Note: N = 105

225





indicating a moderate to complete disclosure practice. Only 5% of the

companies have a score above 400 to 444 i.e. 73% to 80% disclosure. This

results -in an average disclosure of 63% for the entire sector.













Table 4.5.2a shows that variable MDSH is at its significant level with

almost all variables. The highest significant level is between variable

MDSH and variable MDOD and the Pearson's correlation coefficient is

0.672. Variable MDSH is also reaching the significant level with

variable NMD, with a Pearson's correlation coefficient equal to 0.476.


correlated with six independent variables, with the highest Pearson's

correlation coefficient equalling to 0.517 with variable OID.

226

1.000

(0.011) (0.160) (0.210) 1 .304** 1 .238* • -0.159

(0.7351 (0.0281 (0.683)

: 0.177 0.164 1 0.096

1(0.072) (0.095) (0.328)

204* 0.157 -0.055

(0.007) 10.042) I .274** -.367** -0.065

.10.005) 0.000 (0.513)

0.033 .214* I 0.040

(0.001) 0.140

(0.154)

S0.421)

(0.002) I (0.015) (0.105 .333** 0.146 0.102

(0.037) I S0.1101 0.577) .247* -0.138 -0.123

-0.079 1.000

.260** -.199* 1.000

:

0.040

(9.680 -0.030

(0.760)

-0.043 (0.662)

.322** (0.001)

-0.084

(0.394) .424**

(0.136) 1 (0.303) (0.000) -0.041 -0.035 .456** (0.677) (0.727) (0.000)

-0.132 1.000 0.181)

0.151 -0.021 0.125) 1 (0.828) -.240* I 0.067 -0.053 1.000 (0.014) (0.498) I (0.590) -0.052 0.067 I .672**1 .275** 1- 1.000 0598) I(0.498) 0.000) _(0.004) 0.159 .229* .364** ! .338** .476** 1.000 0.105) (0.019) :(0.000) (0.000) 1 (0.000) .

.197* 0.083 0.182 .363** .199* 1 .553** (0.044) (0.399) (0.063) (0.000) (0.042) (0.000)

1.000

1.000

•

4-

Table 4.5.2a: Pearson's correlation coefficients combining independent variables of information technology sector

Variable MDCP MDBD MDAC MDMC MDDC MDRC MDIG MDGB MDOD MDCO MDSH I NMD

MDBD

MDAC

MDMC

MDDC : 1

•

•299**

(Q002) 0.118

;

1 I

:

;

1 I

• !

1

1.000

-0.191 (0.051)

0.065

(0.510) -0.052

(0.598

.254** (0.009)

0.068 (0.489 .215*

(0.028)

-.457** (0.000) 0.091

(0.358) -.452** (0.000)

0.059 (0.552)

.339**

(0.000)

(0.233) -0.136

(0.167) -.225* (0.021) .442**

(0.000)

.239*

_( . 0.119

(0.2281 -0.108 (0.273) 0.018

(0 857) -0.117 0.235)

.208*

(0.033)

.452** (0.000)

MDRC

MDIG

MDGB

MDOD

MDCO

MDSH

NMD

OID

_1

227

Variable

ROE

ROW

ROCE

ROA I

Table 4.5.2b: Pearson's correlation coefficients combining dependent and independent variables of information technology sector

MDCP MDBD MDAC MDMC MDDC MDRC MDIG MDGB MDOD MDCO .320** 0.140 0.146 -0.104 -0.105 .409** 0.010 0.061 0.161 .316**

(0.001) (0.153) (0.136) T.293) (0.284) (0.000) (0.918) (0.537) (0.102) (0.001) -0.031 -0.089 .290** 0.104 0.032 .377** .220* -0.034 0.040 0.145 (0.754) (0366) (0.003)__ (0.292) (0.747) (0.000) AO.024) (0.730) (0.685) 1 (0.140) 0 . 089 -0.009 : .301** I 0.109 -0.039 .452** .216* 0.006 0.061 1 0.182

_.(0.365) : J0.930) J0.002) (0.269) ! 0.695) (0.000) (0.027)_ (0.953) 0.536) 10.064) .245* -0.016 g .261** -0.004 . -0.142 .472** .233* ! -0.033 0.083 1 0.186

(0.012) ! (0.875) (0.007) (0.964) • (0.149) (0.000) (0.017) (0.735) (0.400) (0.058)

MDSH I NMD OID .362** .474**

- -

.517** -------- - -

(0.000) (0.000 (0.000L 0.184 .412** 0.168

(0.060) I (0.000) (0.086) 0.183 i .459** .198*

(0.062) 1 (0.000) L 0.043) .225* .443** L .247*

(0.021) I (0.000) j (0.011)

1

Notes: ** Correlation is significant at the 0.01 level (two-tailed) * Correlation is significant at the 0.05 level (two-tailed) Correlation of MDRM cannot be computed because this variable has a constant value that reflects an absence of disclosure and hence deleted from this table. N = 105

228









Table 4.5.3a: Summary of regression models of information technology sector


1 0.678 0.460 0.383 5.967 0.000 6.173

2 0.671 0.451 0.372 5.739 0.000 0.127

3 0.668 0.446 0.367 5.641 0.000 0.111

4 0.651 0.424 0.341 5.146 0.000 0.082


regression model is model 1. The model explains 46% of the variability

in the dependent variable. As seen in table 4.5.1 earlier, there is an

absence of disclosure with regard to variable MDRM in the

information technology sector thereby being constant or have missing

correlation. This variable is therefore deleted from the current analysis.

The regression is described in the following modified model:

ROE = a + pimpcp p2MDBD + p3MDAC + P4MDMC + p5MDDC +

p6mDRc p7mDIG p8MDGB + p9MDOD + piomDco piimpsH

pi2NmD + pi 30ID E





229


disclose the efforts and steps they would undertake to provide good



that shows a lack of significance for variable MDCP. , We therefore


Hi: Company's philosophy on corporate governance affects

performance.










determine the performance of the company. We do not find evidence

of the significance for variable MDBD in table 4.5.3b. We therefore

reject the hypothesis:


performance.

The information technology sector is a high growth industry, with

aggressive competitions and rapid growth due to globalisation.

Although this variable experiences a complete disclosure practice and

results indicate an appropriate board structure, yet it fails to impact

performance. The main reason for this is that business revenues are

utilized for global expansion, technology infrastructure, training,

research and development. Hence it currently reflects in lack of

significance for performance.

230

III Audit committee






ti indirectly linked to performance. This becomes even more evident by




performance.







performance.


In chapter three, table 3.5.1 provides evidence that only 5 companies

from a total sample of 21 companies have contributed towards

disclosure for variable MDMC. Rest of the companies dOes not have a

management committee. This has proved insignificant in testifying our

hypothesis:


performance.

231


Only 4 companies have provided disclosure for variable MDDC as

seen in chapter three, table 3.5.1. Rest of the companies does not have a

directors' committee. This information is insignificant in testifying our

hypothesis:


performance.









Results in table 4.5.3b testify to the importance of variable MDRC at

10% level of significance, but since we consider only 5% significance

level we reject this hypothesis:











232


complaints.







H8:

Policies and procedures of shareholders/ investors' grievance




shareholders.












performance.




233

Jr







performance.




shareholders exhibit confident in the business of companies and are

therefore satisfied with current financial results and events such as the

quarterly and annual financial results, official news releases,

presentations made to institutional investors or analysts and


accessible through newspapers and internet.

On the other hand, this information relates to the current financial year

and current events. In case of industries undergoing expansion,

globalisation and transformation, in other words newly developed

industries, shareholders are keen to know more about the history of the

companies and their previous performances. They look at wider and

more detailed information. Short term or current year's information

does not impact them. This is evident for the information technology

sector which has seen recent and rapid growth. Results in table 4.5.3b

prove a lack of significance for variable MDCO, thus disproving our

hypothesis:


ti

234

















expansion of their companies. On the other hand, new companies that

are listed for a period of less than ten years or are undergoing

expansion, globalisation and transformation benefit from this

disclosure. The shareholders, potential shareholders, creditors and the

consumers of these companies are impacted by this disclosure. They

analyse this information more closely and are more critical, pushing

the performance level even higher, thereby influencing performance.

This is evident from table 4.5.3b testifying to 1% level of significance of

variable MDSH, thus proving our hypothesis:


235






peer_group_evaluation mechanism of their performance are factors that
















F113: Non-mandatory disclosures influence performance.








236






4.5.3b provides evidence at 10% level of the significance for variable

OID. However, we consider only 5% significance level and therefore




Table 4.5.3b: Regression results of information technology sector



S.C.

Beta dish.


(Constant) -89.052 40.307 -2.209 0.030

MDCP 1.132 0.968 0.125 1.169 0.245

MDBD 1.012 0.722 0.161 1.402 0.164

MDAC -0.277 0.280 -0.097 -0.989 0.325

MDMC -0.402 0.307 -0.134 -1.308 0.194

MDDC 0.086 0.453 0.019 0.189 0.851

MDRC 0.287 0.167 0.208 1.725 0.088

MDIG -0.112 0.447 -0.023 -0.251 0.802

MDGB -0.067 0.237 -0.025 -0.283 0.778

MDOD -0.399 0.346 -0.140 -1.151 0.253

MDCO -0.039 0.149 -0.028 -0.265 0.791

MDSH 0.912** 0.242 0.548 3.764 0.000

NMD 0.131 0.170 0.100 0.768 0.444

OID 0.155 0.094 0.197 1.643 0.104

Notes:



N = 105


237

4.6 PERFORMANCE AND GOVERNANCE IN METAL, METAL

PRODUCTS & MINING SECTOR


in the metal, metal products & mining sector of which 19 are selected

as per the sampling procedure followed for the purpose of this study.

The study-analyses performance and governance in this sector for five

years from 2001-02 to 2005-06.



in the metal, metal products & mining sector for five years from 2001-

02 to 2005-06 having 95 observations. The analysis reveals that variable

MDSH has the highest disclosure followed by variables MDBD, MDIG

and MDAC which have above 80% disclosure indicating an

outstanding disclosure practice. This is followed by variable MDCP

with 76% disclosure. On the other hand, variables MDRM and MDMC,

having the least disclosure reflects a total absence of disclosure, while

variables MDDC and NMD indicate an incomplete disclosure practice.




companies have a score in the range of 276 to 338 points, which is 50%




sector.

238

Table 4.6.1: Descriptive statistics of metal, metal products & mining sector






Management committee- MDMC 3 3 3.00 0.00 20.00










Total score CGI 264 414 307.42 30.76 55.89

Note: N = 95

239






the correlation between them-in-table 4.6.2b.







Table 4.6.2a shows variables MDDC and MDRC are at their significant


between variable MDDC and variable NMD and the Pearson's

correlation coefficient is 0.660. Variable MDRC is reaching the

significant level with variable MDAC, with a Pearson's correlation

coefficient equal to 0.639.


correlated with six independent variables, with the highest Pearson's

correlation coefficient equal to 0.505 with variable MDCO.

240

.._ .... 1 (0.000) 1 (0.000) ._ __(0.1701 i (0.000) ! (0.000) .513** .532** .586** : .660** : .629** i 0.000 (0.000) rt (0.000) : (0.000) (0.000)

NMD :

(0.000) (0.000) 1 (0.125) : (0.008) i (0.003)

.392** : .357** : 0.158 .270** i .306** : OID '

1 1.000 . ;

1 .434** s 1.000 i (0.000) 1 ' .407** .445** (0.000) (0.000)

-4

tir

Table 4.6.2a: Pearson's correlation coefficients combining independent variables of metal, metal products & mining sector

Variable MDCP MDBD MDAC MDDC MDRC MDIG MDGB MDOD MDCO MDSH NMD

MDAC

MDDC

MDRC

MDIG

.359** 1.000 MDBD 4-

(0.000) . A93** .338** (0.000) (0.001) .306** 1 .469** .317** 1.000 (0.003) I. 10.000) (0.002) .459** .502** 1 ,639** (0.000) (0M00) (0.000) .492** .271** 0.194

-0.097 0.070 1 0.075 -0.163 -0.053 (0.351) 10.501)_ I (0.472) I _ (0.115) i (0.611) 0:066 ' -0.083 1 -0.124 : -0.176 1 -0.103

(0.000) (0.008) (0.060) (0.028) (0.007) . -.348** !

1 (0.001) 1 1.000

.

•

. 0.107 ; 0.037 1.000 (0.301) 1 (0.722) .383** 1 -0.093 1 .345** 1.000 (0.000) (0.368) : (0.001) .405** 1 -0.115 -0.011 i .508** (0.000). ! (0.266). (0.916) i _(0.000) .456** : -0.097 0.142 1 .580**

(0.000) i (0.350) 0.171) J (0.000) : .228* i

4

0.026 1 .492** ' .512** 1 (0.026) (0.802) (0.000) 1 (0.000)

MDOD

MDCO

MDSH

(0.526) 1 (0.423) i (0.230) i (M89) i (0.321) .467** 1 .427** I .247* .361** .379** i--

! (0.000) ! (0.000) 1(0.016) : (0.000) 10.000) .358** i 647** 0.142 : .421** .613**

241

Table 4.6.2b: Pearson's correlation coefficients combining dependent and independent variables of metal, metal products & mining sector

Variable MDCP MDBD MDAC MDDC MDRC MDIG MDGB MDOD MDCO MDSH NMD OID ROE

RONW

ROCE

ROA

.339**

(0.001)

0.196

(0.057) 1

.277**

_10.0071

.227*

(0.027)

.204*

(0.048)

0.130

(0.208)

-0.047

0.651)

-0.082

(0.431) I

0.029 ;

(0.777)

.351**

(0.000)

.300**

(0.003)

.285**

(0.005) 1

.294**

(0.004)

0.174

(0.091)

0.105

(0.311)

0.143

(0.167)

-0.105

(0.3101

.431**

(0.000)

.292**

(0.004)

.262*

(0.010)

0.025

(0.813)

0.135

(0.191)

.273**

(0.007)

.231*

(0.024) I

-0.067

(0.518)

-0.050

(0.629)

-0.091

0.378)

-0 .

(0.394) 1

0.175

(0.089)

-0.073

(0.484)

0.043

(0.678)

0.076

(0.465)

.505**

(0.000)

.340**

(0.0011

.433**

0.0001

.424**

(0.000)

0.138

(0.1831

.264**

J0.010)

0.174

. 0.092)

L 0.150

I (0.146)

I .319** .423**

(0.062) L(0.0001_1 I .238* I 0.045

! (0.00) L(0.6664

1 .334** 1 0.053 J

1 (0.00111 0.609)

I .364** 1 0.069 1

(0.000) I (0.506) Notes:

** Correlation is significant at the 0.01 level (two-tailed) * Correlation is significant at the 0.05 level (two-tailed)

Correlation of MDRM and MDMC cannot be computed because these variables have constant values that reflect an absence of disclosure and hence deleted from this table. N = 95

242






results of the four regression models used for the purpose of this study. _



Table 4.6.3a: Summary of regression models of metal, metal products & mining sector


1 0.790 0.624 0.569 11.354 0.000 3.454

2 0.564 0.318 0.219 3.191 0.001 0.229

3 0.645 0.416 0.331 4.869 0.000 0.135

4 0.651 0.423 0.339 5.019 0.000 0.096




there is an absence of disclosure with regard to variables MDRM and

MDMC in the metal, metal products & mining sector thereby being

constants or have missing correlations. These variables are therefore

deleted from the current analysis. The regression is described in the

following modified model:

ROE = a + f3iMDCP + f32MDBD + f33MDAC + f34MDDC + f35MDRC +

p6mDIG f37MDGB + f38MDOD + f39MDCO + f310MDSH + f3iiNMD +

£

243


Companies in this sector practice the ethos of upholding the health and

welfare of employees as a foundation of success. Various forums create

a platform for discussing ethical issues with company's executives,

employees, vendors and all stakeholders. Thus the company's

philosophy on governance causes_ an increase in productivity and

performance. Table 4.6.3b provides evidence at 1% level of significance

for variable MDCP and testifies our hypothesis:


performance.














performance.



performance. The main reason for this is the strong consumption trend

in the global steel market coupled by increase in domestic demand

from automobile and consumer durables sector has pushed for rapid

expansion, causing international joint ventures and nearly doubling the

244

local plant capacity by utilisation of business revenues. Hence it

currently reflects in lack of significance for performance.

III Audit committee







the regression results in table 4.6.3b showing no significance towards

variable MDAC. We therefore reject the hypothesis:


performance.







performance.


The variable MDMC also presents a total absence of disclosure as seen

in table 4.6.1, thereby being constant or have missing correlation. It is




performance.

245


In chapter three, table 3.6.1 provides evidence that only 2 companies

from a total sample of 19 companies have contributed towards

disclosure for variable MDDC. Rest of the companies does not have a

directors' committee. This information has proved insignificant in

testifying our hypothesis:


performance.









Results in table 4.6.3b testify to the importance of variable MDRC at 1%

level of significance, we therefore accept the hypothesis:




remuneration committee as being unproductive. Results prove that this



cost is incurred in accommodating the directors.

246










complaints.






hypothesis:








of this study.






247







performance.





statutory authority, on any matter related to capital markets impacts

performance at 5% level of significance as per variable MDOD in table

4.6.3b, causing us to accept this hypothesis:


performance.

The negative association is aptly justified as penalties involve

payments of huge amount of fines to the respective stock exchanges

and related party transactions cause conflicts with the interests of the

company.










248





Hit Means of communication influences performance.

XII —General shareholder information











This disclosure is required mainly by the existing sharehOlders and has












249

















on performance analysed and interpreted. In table 4.6.3b, we find

evidence of the importance of variable NMD at 1% level of significance.

Hence we accept the hypothesis:


4 XIV Other items included in the annual report








250









Table 4.6.3b: Regression results of metal, metal products & mining sector



S.C.

Beta distr.


(Constant) 5.441 12.383 0.439 0.662

MDCP 2.199** 0.639 0.326 3.441 0.001

MDBD -0.110 0.374 -0.030 -0.293 0.770

MDAC 0.027 0.128 0.024 0.208 0.836

MDDC 0.092 0.192 0.050 0.482 0.631

MDRC -0.556** 0.094 -0.756 -5.915 0.000

MDIG -0.461** 0.107 -0.402 -4.316 0.000

MDGB -0.187 0.123 -0.116 -1.517 0.133

MDOD -0.832* 0.412 -0.195 -2.020 0.047

MDCO 0.373** 0.092 0.404 4.073 0.000

MDSH 0.154 0.136 0.145 1.136 0.259

NMD 0.388** 0.147 0.375 2.637 0.010

OID 0.209** 0.073 0.277 2.856 0.005

Notes:



N = 95


251

4.7 PERFORMANCE AND GOVERNANCE IN OIL & GAS SECTOR


in the oil & gas sector of which 13 are selected as per the sampling

procedure followed in this study. The study analyses performance and

governance in this sector for five years from 2001-02 .to 2005-06.



in the oil & gas sector from 2001-02 to 2005-06 having 65 observations.

The analysis reveals that variable MDBD has the highest disclosure

followed by variables MDCP, MDAC and MDSH having above 80%

disclosure, indicating a complete disclosure practice. Variable MDIG

has 77% disclosure. On the other hand, variable MDMC, having the

least disclosure reflects a total absence of disclosure, while variables

MDRM, MDDC and NMD indicate an incomplete disclosure practice.

Table 4.7.1: Descriptive statistics of oil & gas sector
















Total score CGI 262 342 301.66 21.89 54.85

Note: N = 65

252





indicating a moderate disclosure practice. The maximum disclosure is 62%.

This results in an average disclosure of 55% for the entire sector.













Table 4.7.2a shows variables MDSH and MDCO are at their significant


between variable MDSH and variable MDCO and the Pearson's

correlation coefficient is 0.765. Variable MDCO is also reaching the

significant level with variable MDIG, with a Pearson's correlation

coefficient equal to 0.589. In table 4.7.2b, we find that dependent

variable ROE is significantly correlated with independent variable

MDIG, with a Pearson's correlation coefficient equal to 0.259. Rest of

the dependent variables are not influenced by the independent

variables.

253

Table 4.7.2a: Pearson's correlation coefficients combining independent variables of oil & gas sector

, : , 4 ■

: : ; . : : : ..-: -

0.128 i -0 052 I 1.000 I I MDAC i- ' 1

1 f 4 --I /0.308) : : I (0.678)

. I :

I : ; i i

I MDRM : 0.097

1 . ...

i . i •

i 10.4401., 1. (0.639) I (0.608) I . I I

: : : , ---[ MDDC

0.130 I 0.225 I 0.000 I -0.056 I 1.000 !

: : : ; i : i 7 1 IL /0.301) I (0.071) I (1,000) I (0.656) . 1 I :

: 7 7 .

.357** I .404** I .317** 1 0.227 1 .275* 1 1.000 1 . 1 MDRC : : : :

i : :

1 : .4_

(0.004) I _10.001) 1 (0.010) i (0.068) j (0.027) 1, . 1 1 I

1 .,...__

1 MDIG i 0.202 I 0.092 i 0.063 1 -.434* 0

* -.100 1 .250* 1 1.000 I

t ; : : : I

: :

I (2.190 I (9.461 I (p.620) I _(0.000) i 19.4261 i (0.045) I . I : 4

MDGB 1 0.139 I -0.003 I -.252* I -.322** -0.115 I 0.013 1 .561** I 1. 1 : : 000

: 4 4 -,

: (0.3621 I (0.921) I (0.000)

: : : : i i

MDOD i 0.125 I 0.058 I 0.000 I -0.054 I -0.047 I -0.148 I -0.067 1, -0.041 I 1.000

I. ..._;

MDSH *344. I 0.022 I .765** 1.000

(0.000) I (0.101) I (0.001) I (0.713) I (0.034) 1 (0.000) I (0.000) I (0.074 i (0.859) I (0.000

1.:

.255* I .360** 1 0.148 1 .305* I 0.037 0.203 1 0.020 I 0.196 1 .252* 1 .332** 1 1.000 NMD ! 0.040) i (0.003) 1 (0.238) 1 (a014) I (0.771) I (0.008) I (0.104) I (0.872) I (0.118) l J0.043 . 1 (0.007) . I _

OID 0.237 I .307* I 0.162 I .398** 1 0.088 1 311* I 0.030 I -0.071 I 0.208 i .280*

1 0.201 1

'652**

II

• :

1

1 I Variable I MDCP I MDBD I MDAC I MDRM I MDDC I MDRC I MDIG I MDGB 1 MDOD I MDCO . MDSH NMD

1 MDBD - .407**

----ti 1.000

I 4 i . . i

. . . . . , : 4' i .(0. 0011 ■ I

I

(0.312) (0.644) (1.000) : (0.668) 1 0.712). (0.240) (0.598) I (0.743) .

: MDCO 1 .342** 0.020 .449** -0.041 I -0.204 : .559** 1 .589** I 0.236 : -0.064l.000

--t I 10.005) ; (0.873) 4 (0.000) (0.745) (0.104) 1 (0.000) (0.000) : (0.059) i (0.612) .

254

Table 4.7.2b: Pearson's correlation coefficients combining dependent and independent variables of oil & gas sector

Variable MDCP 1 MDBD 1 MDAC 1 MDRM 1 MDDC I MDRC 1 MDIG 1 MDGB 1 MDOD 1 MDCO I MDSH 1 NMD OID

ROE

1 RONW 1

ROA i 1

0.139 i 0.237 I -0.165 (0.269) I J0.057) 1 (0.188) _ _ 0.011 I -0.008 1 -0.026

i

i : i 1

't I

1 I

-0.018

(0.887) -0.093

(0.459) -0.059 (0.639) -0.087

(0.491)

I

i . 1 I

1 t 1 i

-0.234

(0.060) -0.198 (0.114)

-0.054 (0.670) -0.038 (0.764)

I -0.014

1 (0.914) : -.325**

! J9.0081

1 -0.080 I (0.527) I -0.168 I (0.182)

I .259* I 0.158

I (0.037) 1 (0.209)

_ . _ ; 0.048 : 0.178 I (0.702) i (0.155)

I 0.076 i 0.094

I (0.547) I (0.455) 1 0.091 i -0.015 I (0.469) 1 (0.907)

I

1 1 I

; I

I

-0.046

(0.718) -0.030 (0,814)

0.052 (0.679) 0.087

(0.489)

I

I ! !

i I I

I

0.222

(0.075) --

-0.109

(0.386)

-0.049 (0.699) _ -0.053

(0.677)

0.042

I (0.742) : -

1 -0.117

I (0.353)

ti 0.091 • i (0.470)

I 0.062

I (0.621)

I -0.101

I (0.425) _., .• -

1 -0.066 1 (0.599)

I 0.007 t 1 (0.959) _ _

1 0.013 II I (0.919)

-0.062

(0.623)

-0.177 (0.1591

-0.113 ...,

(0.37) -0.130

(0.301)

ROCE 1

(0.928) I (0.946) i (0.836) 0.154 I 0.037 : 0.119

Li0.221)._ I (0.767) I (0.347) 0.124 1 0.014 I 0.230

(0.325) I (0.910) I (0.065) Notes: ** Correlation is significant at the 0.01 level (two-tailed) * Correlation is significant at the 0.05 level (two-tailed) 1 Correlation of MDMC cannot be computed because this variable has a constant value that reflects an absence of disclosure and hence deleted from this table. N = 65

255









Table 4.7.3a: Summary of regression models of oil & gas sector


1 0.690 0.476 0.342 3.559 0.001 4.209

2 0.537 0.289 0.107 1.593 0.118 0.246

3 0.437 0.191 -0.016 0.924 0.536 0.181

4 0.559 0.312 0.137 1.781 0.072 0.092




there is an absence of disclosure with regard to variable MDMC in the

oil & gas sector thereby being constant or have missing correlation.

This variable is therefore deleted from the current analysis. The

regression is described in the following modified model:

ROE = a + PiMDCP + p2MDBD + p3MDAC + P4MDRM + p5MDDC +

p7mDRc p8MDIG + p9MDGB + piompop piimcco p12mDsH

pi3Nmp 13140ID + E

256



governance, explains it as an abstract term applicable • to companies









performance.














performance.




performance.

257

III Audit committee










performance.










identification, assessment and control. Improper management results

in time wastage and financial losses. The importance of variable




performance.

258


There is a total absence of disclosure with regard to variable MDMC




H5: Pro-cedures related to management committee influences

performance.


In chapter three, table 3.7.1 provides evidence that only one company

from a total sample of 13 companies has contributed towards

disclosure for variable MDDC. Rest of the companies does not have a

directors' committee. This information has proved insignificant in

testifying our hypothesis:


performance.














remuneration committee as being unproductive. Results prove that this

259



cost is incurred in accommodating the directors.










complaints.





level of the significance for variable MDIG, while it experiences a

complete disclosure practice. But since we consider only 5%

significance level we reject this hypothesis:




committee and is initiating policy changes that are gradually impacting

the attitude of shareholders and thereby influencing performance.

260












performance.








this disclosure. In chapter three, table 3.7.1, we find that there is an

average or moderate disclosure for two items and an absence of

disclosure is noticed for the rest two items in this category, causing us

to reject this hypothesis:


performance.

261














Hu: Means of communication influences performance.
















262


expansion of their companies. On the other hand, companies

undergoing expansion, globalisation and transformation benefit from

this disclosure. The shareholders, potential shareholders, creditors and

the consumers of these companies are impacted by this disclosure.

They analyse this information more closely and are more critical,

pushing the performance level even higher, thereby influencing

performance. This is evident from table 4.7.3b testifying to 1% level of

significance of variable MDSH, thus proving our hypothesis:


This sector is experiencing a shift in management from public sector

undertakings to non-public sector undertakings with the government

of India giving up its majority stakes to other financial institutions and

the public at large. This phase of transformation has resulted in a

negative influence on performance.

KIII Non-mandatory disclosures














263


significance of variable NMD. The main reason for this is the



















4.7.3b provides no evidence of the significance of variable OID. The






264

Table 4.7.3b: Regression results of oil & gas sector



S.C.

Beta distr.


(Constant) -0.065 21.689 -0.003 0.998

MDCP -0.032 0.947 -0.005 -0.034 0.973

MDBD 1.230** 0.280 0.603 4.394 0.000

MDAC -0.441 0.375 -0.169 -1.175 0.245

MDRM 3.283* 1.591 0.306 2.063 0.044

MDDC -1.084 0.854 -0.177 -1.269 0.210

MDRC -0.369* 0.184 -0.348 -2.003 0.050

MDIG 0.285 0.168 0.302 1.697 0.096

MDGB -0.072 0.182 -0.052 -0.395 0.694

MDOD 0.382 0.884 0.049 0.432 0.667

MDCO 1.088** 0.302 0.829 3.602 0.001

MDSH -0.630** 0.226 -0.544 -2.789 0.007

NMD -1.536 1.060 -0.219 -1.449 0.153

OID -0.155 0.109 -0.220 -1.426 0.160

Notes:



N = 65


265

4.8 PERFORMANCE AND GOVERNANCE IN TRANSPORT

EQUIPMENTS SECTOR


in the transport equipments sector of which 30 are selected as per the

sampling procedure followed for the purpose of this study. The study

analyses performance and governance in this sector for five years from

2001-02 to 2005-06.



in the transport equipments sector for five years from 2001-02 to 2005-

06 having 150 observations. The analysis reveals that variable MDSH

has the highest disclosure indicating an outstanding disclosure

practice. This is followed by variables MDAC and MDCP which have

above 80% disclosure reflecting a complete disclosure practice.

Variables MDIG and MDBD have 78% disclosure. On the other hand,

variable MDDC having the least disclosure reflects a total absence of

disclosure, while variables MDRM, MDMC and NMD indicate an

incomplete disclosure practice.








sector.

266

Table 4.8.1: Descriptive statistics of transport equipments sector
















Total score CGI 284 368 313.33 19.13 56.97

Note: N = 150

267













Table 4.8.2a shows variables MDCP and MDCO are at their significant


between variable MDCO and variable MDCP and the Pearson's

correlation coefficient is 0.488. Variable MDCP is also reaching the

significant level with variable MDSH, with a Pearson's correlation



Correlated with six independent variables, with the highest Pearson's

correlation coefficient equalling to 0.413 with variable MDRM. Rest of

the dependent variables are not influenced by more than three

independent variables.

268

Variable MDCP MDBD MDAC MDRM MDMC MDRC MDIG MDGB j MDOD MDCO MDSH NMD

MDBD .311** I 1.000 (o.00p)

MDAC _ _ .386** .393** I 1.000 0.000 (0.000 . .331** 0.092 0.137 1.000 MDRM

(0.000) - I (0.261) I (0.096)

MDMC •193* 0.077 : 0.136 .471**

(0.018) I (0.349) I _(0.097) (0.000 .429** -0.121 -0.014 .280** .294** 1.000 MDRC

10.000) ; (0.140) i (0.86 _(0.001) 0.000) 0.077 I -0.026 -0.155 -0.028

0.143 I (0.081)

.181* J0.027) (0.509) (0.696 I (0.846) (0.864)

.488** -0.005 .253** .206* 0.055 MDCO

(0.000) (0.9481_1_(0.002) (0.0111 (0.502)

.484** -0.076 0.131 0.102 0.044 MDSH

(0.000) (0.355) (0.110) (0.214) (0.591)

0.071 .288** : .417** -0.147 -0.068 NMD

0.389) (0.000) (0.000 0.072 0.409)

.203* I -0.045 0.088 .181* -0.153 OID

(0.013) I (0.587) (0.287) (0.027) (0.061)

(0.349) (1755) (0.05D

(0.954 I J0.108) (0.335 (0.59 (0.272) (0.702) . 0.054 I 0.032 -0.016 -0.014 -0.060 -.258** 1 0.010 ' 1.000

(0.467) (0.001) (0.906) .423** 0.075 1 -0.049 1 .170* 1.000

(0.733) (0.424) (0.859) -0.005 I 0.132 0.079 0.043 0.090 0.032 : 1.000

0.066 0.015 1.000

(0.000) I (0.360) (0.548) (0.038) .440** -0.044 I 0.124 I .363** .394** I 1.000 (0.000) (0.596) (0.130) I (0.000) (0.000) -0.059 -0.136 -0.156 -0.020 0.082 -0.082 1.000 (0.471) (0.098) (0.057) (0.807) (0.317) (0.320) 0.142 -0.012 .211** 0.093 .257** .272** 0.096

(0.084) (0.887) (0.010) (0.258) (0.001) (0.001) (0.241)

Table 4.8.2a: Pearson's correlation coefficients combining independent variables of transport equipments sector

269

Table 4.8.2b: Pearson's correlation coefficients combining dependent and independent variables of transport equipments sector

OID .289** 1

(0.000JLi 0.016

(0.846y, 0.107

__(0.192) 1 0.118

(0.149) 1 Notes: ** Correlation is significant at the 0.01 level (two-tailed) * Correlation is significant at the 0.05 level (two-tailed) Correlation of MDDC cannot be computed because this variable has a constant value that reflects an absence of disclosure and hence deleted from this table. N = 150

Variable MDCP MDBD MDAC MDRM MDMC I MDRC MDIG MDGB MDOD I MDCO I MDSH NMD

ROE

RONW 1

ROCE

ROA

.243** (0003) 0.045

(0.580) 0.142

0.063 (0.441)

1

1

1 !

1 1

0.148 (0071) 0.068

_(0.405) 0.110

0.033 (0.686)

1

1

1 1

0.149 (0.068) -.311** (0.000) -0.145

-.194* (0.017)

.413** I (0.000) 1 0.148 1 (0.070) 1 •345**

goo()) .325**

1 (0.000)

-0.101 (0.220)

i -0.150 1 (0.067) 1 -0.050

(0.541) -0.004 (0.963)

.166* 1 (0.042)

0.110 r1 (0182) 1 .233** 1 (0.04) 1 .198* ! (0.015)

1 -.221** (0.007)

1 .305** (0.000)

1 0.129 I (0.116) 1 .165* 1 (0.044)

1

1

1

0.062 (0.450) 0.067

(0.415) -0.015 (0.857) 4 -0.013 i (0.876)

1 0.041 (0.6161 -0.097

_(0.23_91 4 0.004 0.958)

-0.011 1

(0.896) 1

.402** (0.000)

-0.027 (0.746)

1 .290** (0.00) 0.141

(0.084)

1 0.103 (02209) 0.006

(O.9 0.055

(0.503) 0.074

(0.369)

1

1

1 1 1

1

0.011 (0.8961

-0.024 (0.767)

-0.087 (0.291 -0.089 (0.278)

270









Table 4.8.3a: Summary of regression models of transport equipments sector


1 0.679 0.461 0.410 8.954 0.000 4.139

2 0.609 0.371 0.311 6.174 0.000 0.203

3 0.593 0.352 0.290 5.672 0.000 0.126

4 0.515 0.265 0.194 3.767 0.000 0.066




there is an absence of disclosure with regard to variable . MDDC in the

transport equipments sector thereby being constant or have missing

correlation. This variable is therefore deleted from the current analysis.

The regression is described in the following modified model:

ROE = a + 131MDCP + 132MDBD + 133MDAC + 134MDRM + P5MDMC +

p7mDRc 138MDIG + 139MDGB + 1310MDOD + 1311MDCO + 1312MDSH +

pi3Nmp 13140ID + £

271












performance.














performance.




performance.

272

III Audit committee










performance.










identification, assessment and control. Improper management results

in time wastage and financial losses. The importance of variable




performance.

273






_ disclosures to the board relating to all material, financial, and





hypothesis:


performance.







There is a total absence of disclosure with regard to variable MDDC





performance.





274











potential.










complaints.






hypothesis:



275






of this study .












performance.










performance.

276






events such-as-the quarterly and annual financial results, official news
























277






provided and-therefore tend to have a laid back, taken for granted and





















significance of variable NMD. The main reason for this is the



278























279

Table 4.8.3b: Regression results of transport equipments sector



S.C.

Beta distr.


(Constant) 29.820 17.804 1.675 0.096

MDCP -0.243 0.645 -0.036 -0.377 0.707

MDBD 0.401* 0.177 0.172 2.271 0.025 -

MDAC - - -0.087 0.153 -0.048 -0.568 0.571

MDRM 1.441** 0.257 0.450 5.610 0.000

MDMC -1.098** 0.278 -0.311 -3.953 0.000

MDRC 0.010 0.082 0.011 0.120 0.904

MDIG -0.812** 0.231 -0.246 -3.514 0.001

MDGB 0.066 0.073 0.063 0.910 0.365

MDOD -1.014 1.085 -0.071 -0.935 0.351

MDCO 0.381** 0.079 0.396 4.809 0.000

MDSH -0.124 0.145 -0.074 -0.855 0.394

NMD -0.081 0.146 -0.043 -0.556 0.579

OID 0.073 0.059 0.091 1.243 0.216

Notes:



N = 150


280

4.9 PERFORMANCE AND GOVERNANCE IN TOTAL SECTOR

SAMPLE

As per the sampling procedure followed, 170 companies which amount

to the total sector sample are selected for the purpose of this study

from the BSE-500 index constituents of December 8, 2005. The study

--analyses performance and governance in eight sectors for five years

from 2001-02 to 2005-06.



in the total sector sample for five years from 2001-02 to 2005-06 having

850 observations. The analysis reveals that variable MDBD has the

highest disclosure followed by variables MDSH, MDAC, MDCP and

MDIG. These variables indicate a complete disclosure practice. On the

other hand, variables MDDC, MDRM, MDMC and NMD indicate an

incomplete disclosure practice.






of the companies have a score above 370 to 444 i.e. 67% to. 80%

disclosure. The overall average disclosure is 55% for all the sectors.

281

Table 4.9.1: Descriptive statistics of total sector sample



Board of directors MDBD 22 40 32.98 . 3.38 82.45



Management committee- - - - MDMC 3 13 4.11 2.52 27.40



Investors' grievance committee MDIG 21 50 38.27. 6.08 76.54







Total score CGI 224 444 301.81 34.38 54.87

Note: N = 850

282













Table 4.9.2a shows variables MDIG and MDSH are at their significant


between variable MDIG and variable MDSH and the Pearson's

correlation coefficient is 0.652. Variable MDIG is also reaching the

significant level with variable MDBD, with a Pearson's correlation


In table 4.9.2b, we find that dependent variable ROA is significantly

correlated with all independent variables, with the highest Pearson's

correlation coefficient equal to 0.421 with variable MDSH.

On the contrary, dependent variable ROA is negatively correlated with

independent variable MDRM, with a Pearson's correlation coefficient

eauallina to -0.346.

283

0.512) a (0.710) (0.423)i (0.000) I (0.003). :

.179** i .299** .309** -.319** 1 -.205**

MDOD -0.034 i .113** .205** -.110** 0.046

MDGB i-- 1 : ' _(0.008) _(0.000) ! (0.000) 1 (0.000) : 0.017) ;

.091** 1 .307** .160** ' -.143** ' -.082* 1

-1

Table 4.9.2a: Pearson's correlation coefficients combining independent variables of total sector sample

Variable MDCP MDBD MDAC MDRM MDMC MDDC MDRC MDIG MDGB MDOD MDCO

MDBD .174** 1.000

(0.000) . ;

MDAC .269** .419** 1.000 (0.000) ; (0.000)

.089** 1 -.155** -.132** 1.000 MDRM

.1 (0.01_0) .10.000) ; (0.000) - .069* -.097** -.101** 1 .654** 1.000

(0.045) .... (0.005) (0.003) ; (0.000)

0.023 -0.013 0.027 .234** .103**

MDMC

(0.000) 1 (0.000) (0.000) (0.000) : (0.000) .232** I .611** .568** : -.312** 1 -.118**

1 _ (0.000) I (0.000) (0.000)_; (0.000) 1(0.001) !

(0.328) (0.001) (0.000) (0.001) (0.183) .260** .196** .495** -.218** -.140** 0.000) ..._(0.000) (0.000) (0.000) 0.000) .120** ; .348** .583** -.497** -.336** • (0.000) (0.000) 0.000) (0.000) (0.000)

.103** .261** .179** .092** .._ .191** _(0.003) (0.000) (0.000). (0.007) (0.000) .291** 1 .287** .297** -.074* -.078*

(0.000) (0.000) (0.000) (0.030) (0.022)

.085*

(0.013) -0.065 (0.059)

-.097** (0.005)

0.005

(0.876) 0.025

(0.470)

-.161** (0.000)

.267** (0.000) 0.039

(0.261)

1- 1

1 1

•

1.000 .

.330**

(0.000)

.189** (0.000)

.314**

_(0.000) .447** (0.000)

.417** (0.000)

.451** (0.om) .377**

(0.000)

i 1.000

i .

a .253** I pool))

.295**

(0.000) .496** (0.000)

.652** 0.000)

.218**

(p.000) .313**

(0.000)

1 -4.

.

1.000

.077*

10.025) 0.065 0.059)

.239** (0.000)

.090**

_(0.008)

.200**

(0.000)

1.000

.341** 1.000 0.000)

.308** .591** 1.000 0.000) (0.000). . . .463** .261** 0.063 1.000 (0.000) (omoo) (0.068) . .336** .408** .352** .413** (0.000) (0.000) (0.000) (0.000)

MDCO

MDSH

NMD

OID

MDIG -1-- ,_.

284

NMD OID .153** 1 .269** 1

(0.000) (0.00(9i -.091** 1 -0.032 0.008) (0.356) 0.058 1 .193** 1

j0.08911. (0.000) .102** J .218** (0.003) F(0.000) 1

Table 4.9.2b: Pearson's correlation coefficients combining dependent and independent variables of total sector sample

Variable MDCP j MDBD MDAC MDRM MDMC MDDC j MDRC j MDIG MDGB MDOD MDCO MDSH

ROE

RONW

ROCE

ROA

.198**

(0.000)

0.055

(0.106)

.127**

I (0.000) I 0.065

(0.059) .228**

.069*

...(0.043) 0.005

(0.889) I -.314**

(0.000) -.346** (0.000)

-0.030

(0.376) -0.060 (0.080) i -.264** (0.000) -.283** (0.000)

- -0.036

(0.765) -.128**

(0.000) -.135** (0.000)

.137** (0.000 -0.017 (0.622) .300** (0.000) .310** (0.000)

0.042 0.220 -0.022 (0.530) .243**

(0.000) .297** (0.000) ;

0.064 (0.062) -0.058 (0.091) .071*

(0.039) .070*

(0.042)

.085* L .247** .136** 0.013 (0.000) J0.000)

-.158** _ ..1 0.056 .067* (0.000) (0.104 0.050 j .105** .343** .396** 1 (0.002) (0.00(:(0.000) .145** 1 .336** .421' (0.000)1 (0.000) (0.000)

0.048 10.163)

.087*

(0.011) j

-.097** (0.005) .110**

(0.001) .157**

(0.0001 i .267** (0.000) '

.103**

(0.003) (0.000) Notes: ** Correlation is significant at the 0.01 level (two-tailed) * Correlation is significant at the 0.05 level (two-tailed) N = 850

285






results of the.four regression models used forthe purpose of this study.



Table 4.9.3a: Summary of regression models of total sector sample


1 0.393 0.154 0.140 10.899 0.000 5.290

2 0.264 0.070 0.054 4.464 0.000 0.210

3 0.475 0.225 0.212 17.347 0.000 0.122

4 0.499 0.249 0.237 19.813 0.000 0.075




following model:

ROA = a + PiMDCP + P2MDBD + P3MDAC + p4MDRM + p5MDMC +

p6mDpc 137mDRc p8MDIG + p9MDGB + PioMDOD + p11MDCO +

p12mDsH 1313Nmp + 131401D £









286




performance.

II Board of directors -













performance.



performance. The main reason for this is the rapid global expansion,

technology changes and increase in research and development by

utilisation of business revenues. Hence it currently reflects in lack of

significance for performance.

III Audit committee





287






performance,










identification, assessment and control. The importance of variable




performance.

However it has a negative association with the performance variable

indicating that improper management has resulted in time wastage

and financial losses.







288



[clause 49(IV)(F)I. In table 4.9.3b, we find evidence of the importance of


hypothesis:

H5: Procedures related. .to - management committee influences

performance.







The directors' committee is constituted to consider and recommend to

the board matters regarding annual operating plans, business

restructuring proposals, acquisitions, disinvestments, business and

strategy review, long term financial projections, introduction of new

products, sale of companies' investments and raising of finance. In

table 4.9.3b, the importance of variable MDDC at 1% level of

significance is evident. Hence we accept the hypothesis:


performance.






289






















complaints.







290





shareholders.












performance.










performance.

291






events . such as the quarterly and annual financial results, official news


-4 information furnished to any business/market analyst. These are easily






















292


expansion of their companies. On the other hand, new companies that

are listed for a period of less than ten years or are undergoing

expansion, globalisation and transformation benefit from this

disclosure. The shareholders, potential shareholders, creditors and the

consumers of these companies are impacted by this disclosure. They

analyse this information more closely and are more critical, pushing

the performance level even higher, thereby influencing performance.

This is evident from table 4.9.3b testifying to 1% level of significance of

variable MDSH, thus proving our hypothesis:

General shareholder information influences performance.














on performance analysed and interpreted. In table 4.9.3b, we find

evidence of the importance of variable NMD at 5% level of significance.

Hence we accept the hypothesis:

H13, Non-mandatory disclosures influence performance.

293






transactions of-non-executive directors, certification by the CEO and













294

4

Table 4.9.3b: Regression results of total sector sample



S.C.

Beta distr.


(Constant) -0.025 0.034 -0.738 0.461 MDCP 0.004 0.003 0.035 1.027 0.305 MDBD -0.001 0.001 -0.038 -0.914 0.361 MDAC 0.001 . 0.001- 0.040 0.969 0.333 MDRM -0.003* 0.001 -0.110 -2.374 0.018 MDMC -0.004** 0.001 -0.119 -2.856 0.004 MDDC -0.005** 0.002 -0.106 -3.241 0.001 MDRC 0.001* 0.001 0.093 2.308 0.021 MDIG 0.000 0.001 0.030 0.600 0.549 MDGB -0.001 0.001 -0.053 -1.622 0.105 MDOD -0.002 0.002 -0.039 -1.038 0.300 MDCO 0.001* 0.001 0.085 1.983 0.048 MDSH 0.002** 0.001 0.194 3.620 0.000 NMD 0.002* 0.001 0.088 2.076 0.038 OID 0.000 0.000 0.033 0.870 0.385

Notes:



N = 850


295

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