Impact of M & A on firm performance in India: Implications for concentration of ownership and insider entrenchment

performance. On the one hand, concentration of ownership that, in turn, concentrates management control in the hands of a strategic investor, eliminates agency problems associated with dispersed ownership. On the other hand, it may lead to entrenchment of upper management which may be inconsistent with the objective of profit (or value) maximisation. This paper examines the impact of M & A on profitability of firms in India, where the corporate landscape is dominated by family-owned and group-affiliated businesses, such that alignment of management and ownership coexists with management entrenchment, and draws conclusions about the impact of concentrated ownership and entrenchment of ownermanagers on firm performance. Our results indicate that, during the 1995-2002 period, M & A in India led to deterioration in firm performance. We also find that neither the investors in the equity market nor the debt holders can be relied upon to discipline errant (and entrenched) management. In other words, on balance, negative effects of entrenchment of ownermanagers trumps the positive effects of reduction in owner-vs.-manager agency problems. Our findings are consistent with bulk of the existing literature on family-owned and group affiliated firms in India.http://deepblue.lib.umich.edu/bitstream/2027.42/64396/1/wp907.pd

Does certification work in emerging markets? evidence from the Indian IPO market

There is inconclusive evidence regarding the economic value of certification in the context of IPOs in developed markets. Using a natural experiment of regulator mandated IPO grading requirement, we examine the effects of third-party certification in the Indian IPO market. We summarize our empirical results below. First, underpricing is unaffected by the grading process. Second, stock price informativeness as proxied by idiosyncratic volatility increases significantly due to IPO grading process. Third, retail and institutional subscription levels are significantly positively associated with IPO grades after controlling for other certification mechanisms such as underwriter reputation, group affiliation, analyst recommendation and venture capital backing. Finally, using a pseudo grading process we conclude that IPO grades are not mechanically derivable from publicly available information. In a nutshell, we use our unique setting to examine the usefulness of certification in emerging markets with institutional voids

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

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.Corporate Governance, Financial Disclosure Regulation, Voluntary Disclosure, Risk, Cost of Capital

Impact of M&A on firm performance in India: Implications for concentration of ownership and insider entrenchment

performance. On the one hand, concentration of ownership that, in turn, concentrates management control in the hands of a strategic investor, eliminates agency problems associated with dispersed ownership. On the other hand, it may lead to entrenchment of upper management which may be inconsistent with the objective of profit (or value) maximisation. This paper examines the impact of M&A on profitability of firms in India, where the corporate landscape is dominated by family-owned and group-affiliated businesses, such that alignment of management and ownership coexists with management entrenchment, and draws conclusions about the impact of concentrated ownership and entrenchment of ownermanagers on firm performance. Our results indicate that, during the 1995-2002 period, M&A in India led to deterioration in firm performance. We also find that neither the investors in the equity market nor the debt holders can be relied upon to discipline errant (and entrenched) management. In other words, on balance, negative effects of entrenchment of ownermanagers trumps the positive effects of reduction in owner-vs.-manager agency problems. Our findings are consistent with bulk of the existing literature on family-owned and group affiliated firms in India.mergers and acquisitions, corporate governance, manager entrenchment, firm performance, India

Effects of Corporate Policies and Governance Practices on Ownership Structure: Evidence from Chilean Firms

We analyze the effects of financing policies, dividends, and corporate governance on ownership structure in Chilean companies. We used a sample of 185 companies listed on the Santiago Stock Exchange that answered the NCG 341 survey on Corporate Governance Practices in 2013. The two-limit Tobit regression (TLTR) results show that debt and dividend policies exert a negative effect on controlling shareholder ownership and a positive effect on minority shareholder ownership. The results show that these policies facilitate control over corporate management determined by the interests of controlling shareholders, as well as protect minority shareholders’ rights by complementing their monitoring role. Corporate governance practices have significant effects on the ownership structure of Chilean companies.Este artículo se propone analizar el impacto de las políticas de financiamiento, dividendos y gobierno corporativo sobre la estructura de propiedad en compañías chilenas. Se usó una muestra de 185 compañías listadas en la Bolsa de Comercio de Santiago, que contestaron la encuesta NCG 341 sobre Prácticas de Gobierno Corporativo en 2013. Los resultados de las regresiones Tobit de dos límites (TLTR) demuestran que las políticas de endeudamiento y de dividendos negativamente afectan la propiedad de los accionistas controladores y protegen los derechos de los accionistas minoritarios al complementar su rol de monitoreo. Las prácticas de gobierno corporativo tienen efectos significativos sobre la estructura de propiedad de las compañías chilenas

FAMILY OWNERSHIP AND CONTROL IN LARGE FIRMS: THE GOOD, THE BAD, THE IRRELEVANT -- AND WHY

There is a major debate regarding the role of concentrated family ownership and control in large firms, with three positions suggesting that such concentration is (1) good, (2) bad, or (3) irrelevant for firm performance. This article reports two studies to shed further light on this debate. Study 1 uses 744 publicly listed large firms in eight Asian countries to test competing hypotheses on the impact of the combination of family ownership and control on firm performance. On a country-by-country basis, our findings support all three positions. On an aggregate, pooled sample basis, the results support the “irrelevant” position. Study 2, based on a sample of 688 firms from the same eight Asian countries, endeavors to answer why Study 1 obtains different results for different countries. We theorize and document that Study 1 findings may be systematically associated with the level of shareholder protection embodied in legal and regulatory institutions. Study 2 thus sketches the contours of a cross-country, institution-based theory of corporate governance. Overall, our two studies lead to a finer-grained and more cumulative understanding of the crucial debate on family ownership and control in large firms.http://deepblue.lib.umich.edu/bitstream/2027.42/57220/1/wp840 .pd

Business Groups in Emerging Markets: Paragons or Parasites?

Diversified business (or corporate) groups, consisting of legally independent firms operating in multiple markets, are ubiquitous in emerging markets and even in some developed economies. The study of groups, a hybrid organizational form between firm and market, is of relevance to industrial organization, corporate finance, development, economic growth and other domains of economic inquiry. This survey begins with stylized facts on groups around the world, and proceeds to a critical review the existing literature, which has focused almost entirely on groups as diversified entities and on conflicts between controlling and minority shareholders. Other schools of thought on the political economy of corporate groups, on groups and monopoly power, and on groups as networks are discussed next. We then proceed to promising, yet virtually unexplored, alternative lenses for viewing groups, for example, as quasi venture-capitalists or as family-based structures. The analysis points out important biases in the literature including the avoidance of a serious discussion of the origins of business groups, and the unfounded assumption that rent-seeking is the only feasible political economy equilibrium in an interaction between groups and the government. We note that the empirical tendency to use recent data implies that the vast majority of studies exploit cross-sectional variation; the absence of (long) time-series data ensures that some conceptually important issues, such as how groups shape the environment in which they operate, receive relatively little attention. Lastly, we outline an agenda for future research.

Ethics and taxation : a cross-national comparison of UK and Turkish firms

This paper investigates responses to tax related ethical issues facing busines