Emerging Market Business Groups, Foreign Investors, and Corporate Governance
AbstractWe examine the interaction between three kinds of concentrated owners commonly found in an emerging market: family-run business groups, domestic financial institutions, and foreign financial institutions. Using data from India in the early 1990s, we find evidence that domestic international investors are poor monitors, and that foreign institutional investors are good monitors. Whereas affiliates of those groups that attract foreign institutional investment are no more difficult to monitor than are unaffiliated firms, we find that group affiliation reduces the likelihood of foreign institutional investment. More transparent groups (where greater transparency is proxied for by a lower incidence of intra-group financial transactions) are more likely to attract such investment. We conclude that groups are difficult to monitor, and that foreign institutional investors serve a valuable monitoring function as emerging markets integrate with the global economy.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6955.
Date of creation: Feb 1999
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Publication status: published as Khanna, Tarun and Krishan Palepu. "Is Group Affiliation Profitable In Emerging Markets? An Analysis Of Diversified Indian Business Groups," Journal of Finance, 2000, v55(2,Apr), 867-891.
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This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-03-01 (All new papers)
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