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Impact of foreign shareholdings on corporate governance score: evidence from Bombay Stock Exchange, India

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  • Archana Singh
  • Ruchi Kansil

Abstract

The paper examines the effect of foreign shareholdings on corporate governance for a balanced panel of 201 publically traded firms from an emerging economy India, listed on the Bombay Stock Exchange (BSE) using the data for the end of financial years 2007-2008 and 2013-2014. We found that the non-controlling stake of foreign shareholdings affect corporate governance as against the controlling stake. It appears that when foreign shareholders buy large stakes, they favour weak governance because it allows them to exploit minority. Endogeneity is addressed by using the level of foreign shareholdings as an instrumental variable. The impact of market capitalisation, size and age on corporate governance score is significant for firms with non-controlling stake of foreign shareholders. The paper suggests that foreign investors can be instrumental in strengthening corporate governance framework of the firm's they have invested in by exerting the ownership rights which revolves around the type of investment and its time horizon.

Suggested Citation

  • Archana Singh & Ruchi Kansil, 2017. "Impact of foreign shareholdings on corporate governance score: evidence from Bombay Stock Exchange, India," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 19(1), pages 93-110.
    • Handle: RePEc:ids:ijbglo:v:19:y:2017:i:1:p:93-110
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    Citations

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    Cited by:

    1. Faozi A. Almaqtari & Hamood Mohd. Al-Hattami & Khalid M. E. Al-Nuzaili & Mohammed A. Al-Bukhrani, 2020. "Corporate governance in India: A systematic review and synthesis for future research," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1803579-180, January.
    2. Sudam Shrikrushna Shingade & Shailesh Rastogi, 2019. "Shareholders’ Activism and Firm Performance: A Review of Literature," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 10(2), pages 22-30, May.
    3. Narendar V., Rao & K.S., Reddy, 2017. "Guest Editorial: Institutional role, the Market for corporate control and Firm performance," MPRA Paper 80235, University Library of Munich, Germany.

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