Large Shareholder Activism in Corporate Governance in Developing Countries: Evidence from India
نویسندگان
چکیده
Most of the existing evidence on the effectiveness of large shareholders in corporate governance has been restricted to a handful of developed countries, notably the UK, US, Germany and Japan. This paper provides evidence on the role of large shareholders in monitoring company value from a developing and emerging economy, India, whose corporate governance system is a hybrid of the outsider-dominated market-based systems of the UK and the US, and the insider-dominated bankbased systems of Germany and Japan. The picture of large-shareholder monitoring that emerges from our case study of Indian corporates is a mixed one. Like many of the existing studies, while we find blockholdings by directors to increase company value after a certain level of holdings, we find no evidence that institutional investors, typically mutual funds, are active in governance. We find support for the efficiency of the German/Japanese bank-based model of governance; our results suggest that lending institutions start monitoring the company effectively once they have substantial equity holdings in the company and that this monitoring is reinforced by the extent of debt holdings by these institutions. Our analysis also highlights that foreign equity ownership has a beneficial effect on company value. In general, our analysis supports the view emerging from developed country studies that the identity of large shareholders matters in corporate governance.
منابع مشابه
“Say on Pay” Shareholder Advisory Votes on Executive Compensation: The New Frontier of Corporate Governance Activism
متن کامل
Hedge Fund Activism and Bank Loan Contracting
Using a large sample of loans initiated by firms targeted by hedge fund activists during 19942008, we show that hedge fund activism has significant impacts on firms’ bank loan contracts. After the targeting announcement and relative to firms that are not targeted, the targeted firms pay significantly higher spreads, are more likely to be required to secure their loans, face more covenant restri...
متن کاملInternational Corporate Governance and Corporate Cash Holdings
Agency problems are an important determinant of corporate cash holdings. For a sample of more than 11,000 firms from 45 countries, we find that corporations in countries where shareholders rights are not well protected hold up to twice as much cash as corporations in countries with good shareholder protection. In addition, when shareholder protection is poor, factors that generally drive the ne...
متن کاملCorporate Governance and Regulation: Can There Be Too Much of a Good Thing?
For a large number of companies from a cross-section of countries, we analyze how company corporate governance practices, country regulatory regimes and their interaction affect companies’ valuation. We confirm that practices are crucial for efficient company functioning and shareholder protection, and consequently positively impact valuation. We find little positive valuation impact from count...
متن کاملLaw and Corporate Boards: Evidence from Europe
When minority shareholder laws are strong, then minority shareholders should have more power to affect board composition and structure. Therefore, countries with strong minority shareholder laws should have ‘good’ corporate boards of directors (i.e., one that looks out for minority shareholders’ bests interests). Assuming that boards with independent directors and fewer directors are indicative...
متن کامل