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Promoter Ownership and Performance in Publicly Listed Firms in India: Does Group Affiliation Matter?

In: Indian Business Groups and Other Corporations

Author

Listed:
  • Ansgar Richter

    (Erasmus University)

  • Indrani Chakraborty

    (Institute of Development Studies)

Abstract

Many of the largest Indian firms are characterized by promoter ownership, a hybrid form of ownership and governance in which the companies’ founders or their heirs hold controlling stakes, while inviting external minority shareholders to contribute capital, and outside managers to participate in the day-to-day administration of the companies concerned. We analyze a sample of 4056 publicly quoted firms with promoter ownership in India during 2007–2013. We find that in group-affiliated firms, the level of promoter ownership has no effect on performance of firms, as measured by Tobin’s q and return on assets (ROA). However, in stand-alone firms, the level of promoter ownership has a U-shaped relationship with Tobin’s q and no relationship with ROA. Moreover, group-affiliated firms show lower performance than stand-alone firms. This seems to be due to the development of the capital market in post-reform India which has greatly reduced the financing constraints for both group-affiliated and stand-alone firms.

Suggested Citation

  • Ansgar Richter & Indrani Chakraborty, 2023. "Promoter Ownership and Performance in Publicly Listed Firms in India: Does Group Affiliation Matter?," India Studies in Business and Economics, in: Achin Chakraborty & Indrani Chakraborty (ed.), Indian Business Groups and Other Corporations, chapter 0, pages 175-206, Springer.
    • Handle: RePEc:spr:isbchp:978-981-99-5041-6_7
    DOI: 10.1007/978-981-99-5041-6_7
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