A Study on Corporate Governance Practices and its Impact on Market Valuation of Listed Companies in Kerala.

Abstract

This doctoral thesis presents a comprehensive investigation into the corporate governance practices of listed firms in Kerala, India, and their profound impact on market valuation. The study encompasses 45 publicly traded companies listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) and relies on data gathered from the companies' published annual reports. The research objectives of this study are structured to address key aspects of corporate governance and its relationship with market valuation. The study analyzes the levels of compliance with corporate governance practices among the listed companies in Kerala. It explores variations in compliance levels based on market capitalization, shedding light on how company size influences governance standards. Furthermore, the study investigates the growth trends in market valuation among these companies and identifies variations in market valuation based on their governance performance. Finally, it delves into the intricate relationship between corporate governance compliance and market valuation, elucidating how governance directly impacts a company's market worth. The findings of this rigorous examination have far-reaching implications for comprehending the intricate interplay between governance and firm value. One pivotal discovery is the rejection of the null hypothesis concerning uniform corporate governance performance across various market capitalization categories. This underscores the critical importance of tailoring governance assessments to a company's size, with larger-cap companies exhibiting more robust governance processes and structures, essential for attracting investors and ensuring sustained growth. Conversely, smaller-cap companies require specialized governance strategies attuned to their unique needs and challenges. The study also scrutinizes board structures and governance processes, revealing the profound influence of market capitalization in these domains. Differential compliance levels among companies of varying market sizes underscore the necessity of tailor-made governance strategies. This knowledge empowers stakeholders to make informed decisions regarding governance, thereby enhancing overall governance outcomes. Furthermor, the study examines specific governance facets, such as board committees, corporate social responsibility, investor protection, risk management, reporting frameworks, whistleblowing procedures, and stakeholder concerns. These aspects combine to shape the overallgovernance landscape, exhibiting significant variations based on market capitalization. The study recommends customized interventions for small-cap companies to enhance investor protection policies and reporting standards, ultimately fostering transparency and accountability. Crucially, this study establishes a substantial link between corporate governance standards and company market valuation. It highlights that governance is not merely a compliance exercise but a strategic imperative that directly influences a company's market worth. The research underscores that good governance practices result in higher market valuations, emphasizing the significance of considering shareholders' value and financial performance for both investors and corporate executives. In conclusion, this thesis offers an exhaustive exploration of corporate governance standards among listed companies in Kerala, illuminating their impact on firm valuation. The nuanced nature of corporate governance, evidenced by the rejection of null hypotheses and market-size-dependent differences, provides stakeholders with the knowledge required to tailor governance strategies to specific company sizes. Importantly, it advocates for prioritizing governance as a pivotal factor in achieving market success. The study's findings serve as a valuable reference for formulating governance measures that enhance the overall performance and market value of listed companies in Kerala as they continue to evolve in the dynamic business landscape.