UNDERSTANDING CGDP AND ITS IMPACT ON FINANCIAL PERFORMANCE OF MANUFACTURING AND SERVICE SECTOR COMPANIES USING ONTOLOGICAL-BASED MECHANISM

Abstract

Corporate governance is used to describe the processes, customs, policies, laws and institutions that direct companies to administer and control their operations. When these companies disclose their financial aspects to stakeholders in order to understand the state of affairs and futuristic developments, it is termed as corporate governance disclosure practices (CGDP). It is necessary to have good corporate governance in a company for ensuring higher productivity and financial performance. Thus, the given paper examines the level of CGDP and its impact on financial performance of manufacturing (automobile and cement) and service (banking and IT) sector companies in India for a period of nine years from 2014-2022. The firm performance measures include financial ratios along with mandatory and voluntary requirements for performing analysis. Financial ratios include return on equity (ROE), net profit margin (NPM), inventory turnover ratio (ITR) etc. whereas mandatory and voluntary requirements include board composition, stakeholder’s interest, committees (audit, remuneration, nomination), chairman and CEO duality. Based on variables and requirements, the correlation coefficients are computed which shows positive impact on performance of the companies. In addition, the variables involving financial ratios as well as mandatory and voluntary requirements are represented in the form of Ontology thus providing futuristic layout of the proposed corporate governance framework.