IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpfi/0504002.html
   My bibliography  Save this paper

Economic Impact of 'Regulation on Corporate Governance': Evidence from India

Author

Listed:
  • Asish K. Bhattacharyya

    (Indian Institute of Management Calcutta)

  • Sadhalaxmi Vivek Rao

    (Indian Institute of Management Calcutta)

Abstract

India, with its 20 million shareholders, is one of the largest emerging markets in terms of the market capitalization. In order to protect the large investor base, the Securities and Exchange Board of India (SEBI) has enforced a regulation effective from April 2001, requiring mandatory disclosure of information and a change in the corporate governance mechanisms of the listed companies. This study empirically examines the economic impact of the Regulation on the stock market variables. The experimental group exhibits significant reduction in their beta consistent to the notion that increased information and better corporate governance mechanism reduces the risk of these companies.

Suggested Citation

  • Asish K. Bhattacharyya & Sadhalaxmi Vivek Rao, 2005. "Economic Impact of 'Regulation on Corporate Governance': Evidence from India," Finance 0504002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpfi:0504002
    Note: Type of Document - pdf; pages: 65. PDF, ~500KB, 65 pages
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0504/0504002.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jagannathan, Ravi & Wang, Zhenyu, 1996. " The Conditional CAPM and the Cross-Section of Expected Returns," Journal of Finance, American Finance Association, vol. 51(1), pages 3-53, March.
    2. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
    3. Tauchen, George E & Pitts, Mark, 1983. "The Price Variability-Volume Relationship on Speculative Markets," Econometrica, Econometric Society, vol. 51(2), pages 485-505, March.
    4. Hakansson, Nils H & Kunkel, J Gregory & Ohlson, James A, 1982. " Sufficient and Necessary Conditions for Information to Have Social Value in Pure Exchange," Journal of Finance, American Finance Association, vol. 37(5), pages 1169-1181, December.
    5. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    6. Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, April.
    7. Collins, Daniel W., 1975. "SEC product-line reporting and market efficiency," Journal of Financial Economics, Elsevier, vol. 2(2), pages 125-164, June.
    8. Friend, Irwin & Westerfield, Randolph, 1975. "Required Disclosure and the Stock Market: Comment," American Economic Review, American Economic Association, vol. 65(3), pages 467-472, June.
    9. Irwin Friend & Edward S. Herman, 1964. "The S.E.C. Through a Glass Darkly," The Journal of Business, University of Chicago Press, vol. 37, pages 382-382.
    10. Merton, Robert C, 1987. " A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July.
    11. Kunkel, J Gregory, 1982. " Sufficient Conditions for Public Information to Have Social Value in a Production and Exchange Economy," Journal of Finance, American Finance Association, vol. 37(4), pages 1005-1013, September.
    12. Lamdin, Douglas J., 2001. "Implementing and interpreting event studies of regulatory changes," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 171-183.
    13. Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-131, February.
    14. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, vol. 7(3), pages 265-296, September.
    15. Jarrell, Gregg A, 1981. "The Economic Effects of Federal Regulation of the Market for New Security Issues," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 613-675, December.
    16. Diamond, Douglas W & Verrecchia, Robert E, 1991. " Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-1359, September.
    17. Krishnamurti, Chandrasekhar & Sevic, Aleksandar & Sevic, Zeljko, 2005. "Voluntary disclosure, transparency, and market quality: Evidence from emerging market ADRs," Journal of Multinational Financial Management, Elsevier, vol. 15(4-5), pages 435-454, October.
    18. Christine A. Botosan, 2002. "A Re-examination of Disclosure Level and the Expected Cost of Equity Capital," Journal of Accounting Research, Wiley Blackwell, vol. 40(1), pages 21-40, March.
    19. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    20. Verrecchia, Robert E., 1983. "Discretionary disclosure," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 179-194, April.
    21. Grossman, S J & Hart, O D, 1980. " Disclosure Laws and Takeover Bids," Journal of Finance, American Finance Association, vol. 35(2), pages 323-334, May.
    22. Benston, George J, 1973. "Required Disclosure and the Stock Market: An Evaluation of the Securities Exchange Act of 1934," American Economic Review, American Economic Association, vol. 63(1), pages 132-155, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Battaglia, Francesca & Gallo, Angela, 2015. "Risk governance and Asian bank performance: An empirical investigation over the financial crisis," Emerging Markets Review, Elsevier, vol. 25(C), pages 53-68.
    2. Sonja Fagernäs, 2006. "How do family ties, boards and regulation affect pay at the top? Evidence for Indian CEOs," Working Papers wp335, Centre for Business Research, University of Cambridge.
    3. Dr. Madan Lal Bhasin, 2012. "Voluntary Corporate Governance Disclosures: Evidence From A Developing Country," Far East Journal of Psychology and Business, Far East Research Centre, vol. 9(2), pages 10-31, November.

    More about this item

    Keywords

    Corporate Governance; Financial Disclosure Regulation; Voluntary Disclosure; Risk; Cost of Capital;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:0504002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.