International Journal for Multidisciplinary Research (IJFMR)
E-ISSN: 2582-2160 ● Website: [Link] ● Email: editor@[Link]
Assessing Corporate Governance Excellence: A
Comparative Analysis of Primary Sector
Companies
Dr Milla Ram Chauhan
Assistant Professor in Commerce, Government College Shri Renuka JI, Himachal Pradesh
Abstract
This study conducts a comprehensive evaluation of corporate governance practices across primary sector
companies, focusing on five key public entities: ONGC, OIL, NMDC, NLC, and CIL. The analysis is
performed using a seventeen-point model to assess governance excellence, utilizing both descriptive
statistics and non-parametric tests to discern patterns and differences in corporate governance scores for
the period from 2011-12 to 2020-21. The findings reveal varying degrees of governance stability and
improvement among the companies, with significant differences identified particularly between ONGC
and NLC. This research underscores the importance of consistent governance practices in enhancing
corporate performance and provides a comparative insight into the governance strategies adopted by
leading primary sector companies.
Keywords: Corporate Governance, Primary Sector Companies, Performance Evaluation
I. Introduction
Corporate governance, a critical component of organizational management, refers to the structures,
processes, and practices through which companies are directed and controlled (Jensen & Meckling, 1976;
Cadbury (2002). Effective corporate governance ensures accountability, fairness, and transparency in a
company's relationship with its stakeholders, including shareholders, employees, customers, and the
community (Shleifer & Vishny, 1997; Spanos, 2005; Al-Haddad, 2011). The significance of robust
governance mechanisms is particularly pronounced in the primary sector, which encompasses industries
such as mining, oil, and gas, where companies face unique risks and environmental challenges (Aguilera
& Cuervo-Cazurra, 2004).
Over the years, the evolution of corporate governance practices has been subject to rigorous scrutiny,
reflecting their pivotal role in enhancing corporate performance and ensuring stakeholder confidence
(Mallin, 2016). Studies have shown that companies with strong governance frameworks tend to exhibit
superior financial performance and resilience against market fluctuations (Bhagat & Bolton, 2008). This
is especially relevant for primary sector companies, where governance practices are critical in managing
environmental and operational risks (Claessens & Yafeh, 2012).
The current research aims to evaluate the corporate governance practices of primary sector companies,
focusing on their effectiveness and impact on firm performance. By applying a comprehensive
methodological approach, including descriptive statistics and non-parametric tests, this study seeks to
provide insights into governance trends and their implications for organizational excellence (Ahmed &
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International Journal for Multidisciplinary Research (IJFMR)
E-ISSN: 2582-2160 ● Website: [Link] ● Email: editor@[Link]
Hossain, 2020). The findings will contribute to the broader discourse on corporate governance by
highlighting the strengths and weaknesses of governance practices within the primary sector, offering
valuable implications for policymakers and industry stakeholders.
II. Literature Review
The evolution of corporate governance has become a crucial area of study, especially in understanding its
impact on organizational performance and stakeholder trust. Corporate governance encompasses the
frameworks, processes, and practices through which companies are directed and controlled. Early
foundational work by Jensen and Meckling (1976) established that effective governance mechanisms are
essential to mitigating agency problems between managers and shareholders.
Shleifer and Vishny (1997) further expanded this understanding by exploring how various governance
structures affect firm performance and the alignment of interests between stakeholders. They emphasized
that effective corporate governance can significantly reduce agency costs and improve firm value. In the
context of the primary sector, which includes industries such as oil, gas, and mining, corporate governance
practices have been critically examined due to the sector’s inherent risks and environmental impacts.
Aguilera and Cuervo-Cazurra (2004) highlighted the unique governance challenges faced by primary
sector companies, including the need for effective stakeholder management and environmental
stewardship. This study underscored the importance of governance frameworks that balance economic
goals with social and environmental responsibilities.
Mallin (2016) provided a comprehensive overview of corporate governance practices, focusing on the oil
and gas industry. Mallin's work suggests that companies with robust governance mechanisms tend to be
more resilient to market and regulatory pressures. This observation is supported by Bhagat and Bolton
(2008), who demonstrated that strong governance frameworks positively impact firm performance and
investor confidence. The methodological approaches for evaluating corporate governance have also
evolved.
Conyon and He (2017) employed statistical methods to analyze executive compensation and governance
structures, providing a methodological basis for assessing governance practices. They used both
parametric and non-parametric tests to address issues related to data normality, a practice that aligns with
the approach taken in the current study.
Brown and Caylor (2006) conducted a large-scale analysis of corporate governance indices, using
descriptive statistics to evaluate governance practices across different industries. Their findings offer
valuable insights into how governance practices influence firm performance, a perspective that is critical
for understanding governance trends in the primary sector.
Claessens and Yafeh (2012) reviewed the impact of corporate governance on financial performance,
highlighting the role of board structure, ownership concentration, and regulatory environments. Their
work reinforces the importance of governance practices in achieving long-term organizational success.
Recent studies, such as those by Ahmed and Hossain (2020), have utilized advanced statistical tools like
the Kruskal-Wallis test to address non-normality in governance data. Their research highlights the
importance of applying appropriate statistical methods to ensure the validity of governance evaluations.
Bebchuk and Cohen (2005) provided further insights into the relationship between governance structures
and firm performance, emphasizing the role of board independence and shareholder rights in enhancing
corporate governance.
Overall, the literature reveals that effective corporate governance is pivotal for achieving organizational
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International Journal for Multidisciplinary Research (IJFMR)
E-ISSN: 2582-2160 ● Website: [Link] ● Email: editor@[Link]
excellence, particularly in sectors with high-risk profiles like the primary sector. This study builds on
existing research by applying a comprehensive methodological framework to evaluate corporate
governance practices, aiming to contribute valuable insights into governance trends and their impact on
firm performance.
III. Research Methodology
3.1 Scope of the Study
The scope of this study encompasses a comprehensive analysis of corporate governance practices within
primary sector companies over a decade. By evaluating corporate governance scores from a diverse set of
companies, the research aims to identify trends, best practices, and areas for improvement in governance
excellence. This study focuses on the period from 2011-12 to 2020-21, allowing for a robust examination
of how governance practices have evolved in response to regulatory changes, market dynamics, and
internal company policies. The findings are intended to contribute to the academic discourse on corporate
governance by offering a comparative analysis that highlights the distinctive governance strategies within
the primary sector, providing valuable insights for policymakers, scholars, and industry practitioners. This
research adopts a multi-faceted methodological approach to evaluate corporate governance practices
within primary sector companies. The study is structured around a comprehensive assessment model that
considers seventeen critical points of governance (Das 2013), ensuring a holistic evaluation.
3.2 Objective of the Study
The primary objective of this research design is to evaluate the corporate governance scores of the primary
sector companies and compare them to identify best practices and areas for improvement. The study aims
to contribute to the literature by providing a detailed analysis of corporate governance excellence within
the primary sector.
3.3 Sample Selection
The study focuses on five prominent primary sector companies: ONGC, OIL, NMDC, NLC, and CIL,
selected based on their Net Worth as on 31 March 2021. These are the largest primary sector companies
in the Indian economy which are under the control of the central government of India. The corporate
governance scores for these companies were collected for a ten-year period i.e. 2011-12 to 2020-21. The
study used secondary data collected from annual reports and corporate disclosures of these companies.
The list of selected primary sector companies has been displayed in table 1.
Table 1: Sample Companies
Companies Name of Companies Net Worth as on 31-03-21 (In Cr)
Primary Sector Undertakings ONGC 204,558.56
NMDC 29,756.14
OIL 26,210.64
CIL 16,751.66
NLC 13,574.68
Source: Annual reports of companies
3.4 Hypothesis for the study
H1: The Corporate Governance score is normally distributed across all Primary Sector Companies.
H2: The variances in the Corporate Governance score are equal across all Primary Sector Companies.
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H3: There is no significant difference in Corporate Governance score of Primary Sector Companies.
3.5 Statistical Tools
The study applied descriptive statistical tools, including arithmetic mean, standard deviation, skewness,
kurtosis, and coefficient of variation to analyze the data. The assumptions of normality and homogeneity
of variance were tested using the Kolmogorov-Smirnov and Shapiro-Wilk tests, as well as Levene’s test,
respectively. The study applied pairwise comparison to further explore the differences, with adjusted p-
values calculated to identify significant differences between specific company pairs. All data analyses
were performed using SPSS, and the results were presented in tabular and graphical formats to facilitate
a clear understanding of the trends and differences in corporate governance practices among the
companies.
IV. Results and Discussion
4.1 Trend Lines Depicting Corporate Governance Scores of Primary Sector Companies:
The corporate governance scores of five primary sector companies over the last decade reveal distinct
trends. ONGC shows a slight decline from 86 in 2013-14 to 80 in 2020-21, indicating potential governance
challenges. OIL exhibits steady improvement, peaking at 84 from 2017-18 onward, reflecting consistent
governance enhancement. NMDC maintains stability, with scores fluctuating marginally around 83,
signalling sustained governance practices. NLC demonstrates significant progress from 75 in 2011-12 to
81 in 2020-21, suggesting strengthened governance. CIL shows an upward trend peaking at 85 in 2018-
19, followed by a drop to 79 in 2020-21, indicating possible recent governance issues. These trends reflect
varying degrees of governance practices and improvements across the companies.
Table 2: Trend Lines of Corporate Governance Score of Primary Sector Companies
90
88
86
84
82
CG Score
80
78
76
74
72
70
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
ONGC 82 81 86 86 86 85 85 85 81 80
OIL 73 80 81 83 80 80 84 84 84 83
NMDC 80 80 82 83 83 83 82 83 83 83
NLC 75 75 75 74 79 79 78 81 81 81
CIL 73 75 74 82 83 84 84 85 85 79
Source: Authors Construct
4.2 Descriptive Statistics
Descriptive statistical analysis has been presented in the Table 3. The analysis states that ONGC has the
highest mean score, 83.70 points, with standard deviation 2.41 followed by NMDC (82.20), OIL (81.20),
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CIL (80.40) and NLC (77.80) with standard deviation of 1.23, 3.36, 4.76 and 2.82 respectively. The value
of Skewness was found negative for all the companies indicating variation to the higher side of mean. The
value of Kurtosis was positive for OIL and NMDC which depicts that the distribution of Corporate
Governance score is Leptokurtic i.e., score is around the mean, whereas it is negative for ONGC, NLC
and CIL, which states that it is platykurtic i.e., away from the average. Coefficient of variance is least for
NMDC (1.49 percent) indicating most consistent compliance of Corporate Governance norms followed
by ONGC (2.88 percent), NLC (3.62 percent), OIL (4.14 percent) and CIL (5.92 percent) respectively.
Table 3: Descriptive Statistics
Companies Mean Std. Deviation Skewness Kurtosis C.V
ONGC 83.70 2.41 -0.52 -1.77 2.88
OIL 81.20 3.36 -1.75 3.76 4.14
NMDC 82.20 1.23 -1.36 0.37 1.49
NLC 77.80 2.82 -0.12 -1.88 3.62
CIL 80.40 4.76 -0.66 -1.45 5.92
Source: Author’s Calculations, SPSS Output.
4.3 Pair-wise Comparison
The pair-wise comparison of Corporate Governance scores of Primary Sector Companies has been
conducted by employing Non-Parametric tests i.e., Kruskal Wallis test as the assumptions of normality
and homogeneity was not satisfied. Table 4, present the results of the normality test. The analysis indicates
that the null hypothesis of normality is rejected in case of all companies at 5 percent and 10 percent level
of significance by Shapiro-Wilk test whereas in Kolmogorov-Smirnov test hypothesis is rejected for
ONGC, OIL and NMDC. Therefore, it can be concluded that Primary Sector Companies do not satisfy the
assumption of normality.
4.4 Test of Homogeneity of Variance
To examine the assumption of homogeneity of variance in the data, Levene’s test has been applied.
Table 5, reports the result of the homogeneity of variance. Levene’s test is used to check the
homogeneity of variance. The null is rejected at 5 percent and 10 percent level of significance which
shows that variances in the Corporate Governance scores are not equal across all the companies. Thus,
the assumption of homogeneity is also not satisfied.
4.5 K-W Test
The study rejected both the assumptions of normality and homogeneity of variance. Therefore, non-
parametric test Kruskal Wallis test was applied to check the mean difference of Corporate Governance
Scores in primary sector companies. The results of the test have been presented in Table 6. The Chi-Square
value is 15.208 (df = 4) with p-value 0.004 which rejects the null hypothesis (H3) at 5 percent level of
significance, implying that there is a significant difference among Corporate Governance scores of
primary sector companies.
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Table 7 highlights the mean ranks of Corporate Governance indices of primary sector companies. It is
evident from the table that ONGC has the highest mean rank i.e. 36.70 followed by NMDC with mean
rank 28.20; OIL with mean rank 25.55; CIL with mean rank 25.20 and NLC with mean rank 11.85.
Table 8 reports the results of pair-wise comparison of Corporate Governance score of primary sector
companies. It is evident from the analysis of adjusted p-value that there is a significant difference in
Corporate Governance score of primary sector companies with respect to NLC and ONGC (P-
Value=0.001). While in case of other pairs of companies, there is no significant difference in Corporate
Governance indices.
Table 4: Test of Normality
Name of Companies Kolmogorov-Smirnov Shapiro-Wilk
Statistics df Sig. Statistics df Sig.
Corporate Governance Indices ONGC 0.306 10 0.009 0.818 10 0.024
OIL 0.260 10 0.053 0.785 10 0.010
NMDC 0.342 10 0.002 0.682 10 0.001
NLC 0.240 10 0.109 0.851 10 0.060
CIL 0.231 10 0.138 0.838 10 0.042
Source: Author’s Calculations, SPSS Output.
Table 5: Test of Homogeneity of Variance
Levene df1 df2 Sig.
Statistic
Corporate Governance Based on Mean 5.695 4 45 0.001
Index Based on Median 2.390 4 45 0.065
Based on Median and with 2.390 4 29.011 0.074
adjusted df
Based on trimmed mean 5.363 4 45 0.001
Source: Author’s Calculations, SPSS Output.
Table 6: Significance of Difference among Corporate
Governance
Chi-Square 15.208
Df 4
Asymp. Sig. 0.004
a. Kruskal Wallis Test
b. Grouping Variable: Companies
Source: Author’s Calculations, SPSS Output.
Table 7: Mean Ranks
Companies N Mean Rank
ONGC 10 36.70
OIL 10 25.55
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NMDC 10 28.20
NLC 10 11.85
CIL 10 25.20
Total 50
Source: Author’s Calculations, SPSS Output.
Table 8: Pair-wise Comparison of Corporate Governance Indices
Sample 1 and Sample Test Standard Standard Test Sig. Adj.
2 Statistic Error Statistics Sig.
NLC and CIL -13.350 6.478 -2.061 0.39 0.393
NLC and OIL 13.700 6.478 2.115 0.034 0.345
NLC and NMDC 16.350 6.478 2.524 0.012 0.116
NLC and ONGC 24.850 6.478 3.836 0.000 0.001*
CIL and OIL 0.350 6.478 0.054 0.957 1.000
CIL and NMDC 3.000 6.478 0.463 0.643 1.000
CIL and ONGC 11.500 6.478 1.775 0.076 0.759
OIL and NMDC -2.650 6.478 -0.409 0.683 1.000
OIL and ONGC 11.150 6.478 1.721 0.085 0.852
NMDC and ONGC 8.500 6.478 1.312 0.190 1.000
Source: Author’s Calculations, SPSS Output.
Figure-1 Pair-wise Comparison of Corporate Governance Indices
(Each node indicates the sample average rank of Corporate Governance Indices of Companies)
Figure-1 depicts the pairwise comparison of Corporate Governance indices of primary sector companies
in the form of diagrammatic figure where the pairs indicated by red lines reflect the pairs of companies
having significant difference between their mean ranks of Corporate Governance indices while the pairs
highlighted by black lines indicated the insignificant ones. Hence, it can be observed from the below
diagram that the pair of NLC and ONGC is highlighted by red line indicating significant difference in
their mean ranks of Corporate Governance indices whereas, other pairs of Primary Sector Companies are
highlighted by black lines signifying insignificant differences.
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V. Conclusion
The comparative analysis of corporate governance practices among primary sector companies reveals
significant variations in their governance scores over the last decade. ONGC consistently exhibited strong
governance, though with a slight decline towards the end of the study period, while OIL showed steady
improvement, particularly after 2017-18. NMDC maintained stable governance practices with minimal
fluctuation, whereas NLC demonstrated notable progress, indicating a strengthening of its governance
framework. CIL, despite an initial upward trend, faced governance challenges in recent years, as reflected
in its declining scores. The study highlights the importance of robust governance practices and the need
for continuous improvement to address emerging challenges. The significant differences observed,
especially between ONGC and NLC, underscore the need for tailored governance strategies that reflect
the unique contexts of each company. Overall, this research contributes valuable insights into the corporate
governance dynamics within the primary sector.
This study underscores the critical need for enhanced corporate governance frameworks within primary
sector companies, particularly emphasizing the importance of consistent governance practices to sustain
corporate excellence. Policymakers should consider refining regulatory guidelines to address governance
disparities across companies, fostering a more uniform and robust governance landscape. Future research
could extend this analysis to secondary and tertiary sectors, exploring the impact of governance practices
on overall corporate performance across various industries.
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E-ISSN: 2582-2160 ● Website: [Link] ● Email: editor@[Link]
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