Moderating Effect of CEO Duality on Board Independence–Financial Health Relationship: Evidence from Indian Small-Cap Textile Firms
DOI:
https://doi.org/10.55829/p9e4we65Keywords:
Corporate Governance; Board Independence; CEO Duality; Financial Health; Textile Sector; Emerging MarketsAbstract
This study examines whether CEO duality moderates the relationship between board independence (BI) and financial health in Indian small-cap textile firms. Using panel data for 17 Bombay Stock Exchange–listed companies from 2015 to 2024 (170 firm-year observations), financial health is measured through a Composite Financial Health Index (CFHI) integrating the Altman Z-Score, Springate S-Score, Zmijewski X-Score, and Grover G-Score. Moderation analysis, conducted via Hayes’ PROCESS macro (Model 1) with heteroscedasticity-consistent standard errors, reveals that BI alone has a positive but statistically insignificant effect on CFHI. However, CEO duality significantly weakens this relationship (B = –0.0156, p = .0126), supporting agency theory’s view that concentrated leadership power undermines board oversight. Findings suggest that governance reforms in high-risk, small-cap sectors should prioritise CEO–chair separation and strengthen the functional capacity of independent directors. This research contributes to corporate governance literature by integrating a multidimensional financial health measure with a moderation framework in an underexplored emerging-market sector, offering actionable insights for regulators, boards, and investors.
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