Ownership Concentration and Firm Performance in India
Year: 2020
Type: article
Abstract: Ownership concentration is considered an important corporate governance mechanism because owners with concentrated shareholding influence the operations and management of a company. The ownership structure in developing countries is quite different from that in the developed markets, thus, we provide empirical evidence from an important emerging market like India. This study used panel data models and instrumental variables techniques using GMM on a large sample of 11,136 firm-year observations to get efficient and reliable results. The endogeneity of ownership concentration has not been examined in India before. In this paper, ownership concentration is measured by Herfindahl's index as suggested by Demsetz and Lehn (1985); and Leach and Leahy (1991). Other Indian studies in this area have used promoter shareholding as a proxy of ownership concentration. After controlling for endogeneity, we find that ownership concentration affects both market and accounting performance of a company, positively. The results suggest that concentrated ownership reduces agency costs as blockholders actively monitor the management of the company, thereby leading to better firm performance.
Source: Global Business Review
Authors: Tripti Nashier, Amitabh Gupta
Institution: University of Delhi
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3006158680