Corporate Linkages and Financial Performance: A Complex Network Analysis of Indian Firms

Corporate governance has a significant impact not only on the behavior and performance of a corporation but also on the functioning of other corporations, entrepreneurialism in the economy, and the working of capital markets. One way of looking at the effects of corporate governance on company performance is to study the contributions of the corporate board of directors. In this article, we explore the network of the director boards for the top Indian corporations to better understand the effects of the interlocking of management boards when the financial performance is considered. To study the corporate networks, we collected and analyzed relevant data set of the top 150 Indian companies on the basis of the maximum revenue generation. We find that the debt-to-equity ratio (D/E), on average, tends to decrease as the measure of the degree centrality of certain corporations increases. Furthermore, we study a modularity maximization-based community structure of the network of director boards to better comprehend the interconnections of the Indian corporates. Moreover, the underlying relationship between the modularity and the corporate performance is also analyzed, and it can be observed that most of the top Indian corporations, with low net current asset value per share, belong to the larger communities.