Shareholder Types, Corporate Governance and Firm Performance: An Anecdote from Indian Corporate Sector
Abstract
The issues regarding corporate governance have received major attention owing to their apparent importance for the economic health of companies especially after plethora of corporate scams and debacles in the recent times. High ethical values can reduce costs to achieve a high corporate governance standard and make it more sustainable. Improving corporate governance is an issue of critical importance to India today and for future developments. The Indian government has realized that good corporate governance is necessary to improve corporate competitiveness and to attract foreign investors. It is believed that with better corporate governance, listed firms can reduce agency costs, become more competitive in global markets, and fulfill their social responsibilities. There are no conclusive evidences so far in the literature in proving the linkages between shareholder types and firm performance, hence the present study will add and address the glaring knowledge gap in Indian literature. The typical shareholder types among listed companies in India are institutions, government, managers, foreigners and diverse shareholders. Using panel regression, the relationships between shareholder types and financial performance as measured by Tobin’s Q, ROA, ROE were tested taking a sample of BSE100 companies excluding banking and insurance companies. The analysis of the result shows significant positive influence of foreign institutional investors and family ownership on ROE whereas government and retail shareholder affect ROE negatively. Also, the corporate governance index has a significantly negative impact on ROE. However, the relationship of CGI with ROA and Tobin's Q was not found to be significant.
Submission of an article implies that the work described has not been published previously (except in the form of an abstract or as part of a published lecture or academic thesis), that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, will not be published elsewhere in the same form, in English or in any other language, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication.
Copyrights for articles published in MTI journals are retained by the authors, with first publication rights granted to the journal. The journal/publisher is not responsible for subsequent uses of the work. It is the author's responsibility to bring an infringement action if so desired by the author.
