Panel Data Evidence from NSE-500 Firms Using Fixed Effects and Two-Stage Least Squares Estimation
Author(s): Swati Verma
Affiliation: Department of Commerce, Shyama Prasad Mukherji College for Women, University of Delhi, New Delhi, India
Page No: 35-39-
Volume issue & Publishing Year: Volume 3, Issue 3, 2026/03/07
Journal: International Journal of Modern Engineering and Management | IJMEM
ISSN NO: 3048-8230
DOI:
Abstract:
India’s corporate governance landscape has undergone substantive regulatory evolution through SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations 2015, subsequent amendments mandating at least one woman director, board independence thresholds of 50% for NSE-listed firms with a non-executive chairperson, and the Companies Act 2013’s CEO duality separation requirements. Simultaneously, SEBI’s Business Responsibility and Sustainability Report (BRSR) mandate from FY2022-23 has raised ESG disclosure expectations, linking governance quality to sustainability reporting completeness for the first time in Indian regulation. These overlapping regulatory interventions create a natural experimental context for assessing whether mandated governance reforms produce measurable improvements in firm financial performance, or whether compliance is largely ceremonial in the institutional context of India’s concentrated promoter-ownership structure.
This study analyses an unbalanced panel dataset of 247 NSE-500 firms over 2015-2024 (2,183 firm-year observations) using CMIE Prowess and BSE Corporate Governance disclosure data. Board composition variables include board size, proportion of independent directors, CEO duality, women director representation, and board meeting frequency. Ownership variables include promoter holding percentage, institutional investor (DII + FII) holding, and pledge ratio. The baseline model employs two-way fixed effects (firm and year) to control for unobserved time-invariant heterogeneity and common time shocks. Endogeneity of board composition is addressed through Two-Stage Least Squares (2SLS) using staggered SEBI mandate compliance dates as instrumental variables.
Fixed effects results confirm that board independence exerts a significant positive effect on ROA (β=0.0312, p<0.01) and Tobin’s Q (β=0.184, p<0.001), while CEO duality is associated with lower ROA (β=−0.019, p<0.05). Women director representation shows significant positive effects on all performance measures, with Tobin’s Q improvement of 0.167 per unit increase in women director proportion (p<0.01). 2SLS estimates confirm the direction and significance of these relationships under endogeneity correction, with board independence’s ROA coefficient increasing to 0.047 (p<0.01) when instrumented, suggesting that OLS estimates understate the true governance-performance relationship due to reverse causality.
Keywords:
corporate governance, board independence, CEO duality, firm performance, panel data, fixed effects, 2SLS, NSE-500, SEBI regulations, women directors, ownership structure, Tobin's Q, ROA, LODR, India
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