Corporate Governance, Competition and Firm Performance: Evidence from India

The objective of this article is to disentangle the combined effect of product market competition and corporate governance variables on firm performance. While the linkage between internal governance mechanism and firm performance is well established in several studies, the interaction between internal and external governance mechanism has received scanty attention in emerging market economies. Here we have shown the independent and interaction effect of ownership and competition variables on firm productivity. Contrary to conventional wisdom, we document that competition has in reality become a discernible force in developing economies. The econometric modelling result shows that while the stand-alone effect of ownership variable on productivity is mostly insignificant, there is a strong positive interaction effect with competition variables.