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Evidence on the Non-linear Effect of Large Ownership on the Enterprise Value of Indian Manufacturing Firms

Author

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  • Krishna Dayal Pandey
  • Tarak Nath Sahu
  • Apu Manna

Abstract

The study advances the existing literature on corporate finance and governance by establishing a non-linear effect of large ownership on the enterprise value of Indian manufacturing firms. The study employs both static and dynamic panel models on a set of panel data consisting of 112 Indian manufacturing firms. The study establishes a U-shaped relationship between large ownership and enterprise value of the sampled firms. Large promoters until 34% of ownership are found to exert a negative effect on enterprise value which signifies expropriation effect along with poor alignment of interest with the firms. However, for ownership concentration by promoters after the said threshold, the effect is found to be positive signifying improved alignment of interests, efficient monitoring and disciplining of managerial opportunistic behaviour. Based on the findings, the study suggests the Indian manufacturing firms not to entirely rely on the role of large owners and to opt for improved external regulatory and institutional establishment for the protection of minority shareholders’ interest and ensuring stringent corporate governance.

Suggested Citation

  • Krishna Dayal Pandey & Tarak Nath Sahu & Apu Manna, 2022. "Evidence on the Non-linear Effect of Large Ownership on the Enterprise Value of Indian Manufacturing Firms," Vision, , vol. 26(3), pages 328-338, September.
    • Handle: RePEc:sae:vision:v:26:y:2022:i:3:p:328-338
    DOI: 10.1177/0972262920984017
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