Ownership Concentration and Firm Value: A Study from the Indian Corporate Sector
AbstractThis paper contributes to understanding corporate governance issues in emerging economies by examining how blockholders influence firm value. Using a much disaggregated and uniform database from the Indian corporate sector for the year 2001, we examine the interaction between ownership structure and firm value in the following ways. Unlike most existing research, which studies the aggregate level of ownership, we include a wider set of mechanisms, such as identity and ownership concentration of outside blockholders controlling at least 5 percent of total equity of the firm. We analyze the role played by these shareholders with substantial voting power in situations when equity holding is less compared to the more concentrated holdings of promoters. We also attempt to see if these investors coordinate among themselves to constrain insiders from expropriating corporate resources. We find a significant curvilinear relationship between firm value and the fraction of voting rights owned by insiders. The curve slopes downward until insider ownership reaches approximately between 45 percent and 63 percent, then slopes upward. Empirical results on ownership concentration by minority blockholders do not support the monitoring hypothesis of these investors. Furthermore, the coordinated behavior of the largest two minority blockholders has an increasing (decreasing) impact on firm value when the collective control is located in the lower (higher) range. The coordination problem worsens if the largest two are private corporate bodies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.
Volume (Year): 41 (2005)
Issue (Month): 6 (November)
Contact details of provider:
Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024
blockholders; corporate governance; India; ownership structure;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Sinha, Pankaj & Singhal, Anushree, 2012. "A note on Corporate Governance in Public Sector Undertakings in India," MPRA Paper 41038, University Library of Munich, Germany.
- Pursey Heugens & Marc Essen & J. Oosterhout, 2009. "Meta-analyzing ownership concentration and firm performance in Asia: Towards a more fine-grained understanding," Asia Pacific Journal of Management, Springer, vol. 26(3), pages 481-512, September.
- Victor Chen & Jing Li & Daniel Shapiro, 2011. "Are OECD-prescribed “good corporate governance practices” really good in an emerging economy?," Asia Pacific Journal of Management, Springer, vol. 28(1), pages 115-138, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Nguyen).
If references are entirely missing, you can add them using this form.