Is Blood Thicker than Water? Appraising Adequacy of Indian Corporate Governance for Family Based Companies: A Case Study of Satyam Computers

26 Pages Posted: 23 Feb 2009  

Vrajlal K. Sapovadia

Shanti Business School (SBS)

Kandarp Patel

affiliation not provided to SSRN

Date Written: February 22, 2009

Abstract

One third of the Indian companies are controlled by one or another family members in concert. In recent past corporate governance crisis is surfaced in few family controlled business houses. We studied financial & market performance of 44 top Indian companies listed in Forbes Global 2000, which includes 19 family controlled companies. We compared financial & market performance of family based companies with the non-family based companies. It is observed that family based business have higher revenue and profit generating capabilities, but we observed greater fall in market value of their securities during 2007. Our research identified companies, which faced corporate governance problem. It is found that one third of the family based companies have corporate governance problems. Our investigation shows that in spite of strong corporate governance framework & series of legislation in India, top management violates governance norms either to favor family members or due to jealousy amongst sibling. It is found that there is lack of supervision and inefficiency in prosecuting violators. We investigated in detail the recent serious governance failure at India's 4th largest ITfirm, Satyam Computers Services Limited and reasons of such large magnitude failure of checks & balances in action. We have used primary & secondary data to substantiate the conclusionusing appropriate research techniques. The research is useful to the policy makers in designing & implementing corporate governance framework in general & special to family based companies.

Keywords: Corporate Governance, Satyam Computers, Family Based Business

JEL Classification: G3

Suggested Citation

Sapovadia, Vrajlal K. and Patel, Kandarp, Is Blood Thicker than Water? Appraising Adequacy of Indian Corporate Governance for Family Based Companies: A Case Study of Satyam Computers (February 22, 2009). Available at SSRN: https://ssrn.com/abstract=1347868 or http://dx.doi.org/10.2139/ssrn.1347868

Vrajlal K. Sapovadia (Contact Author)

Shanti Business School (SBS) ( email )

Opp. Vral Gardens, Off S. P. Ring Road
Shela
Ahmedabad, Gujarat 380058
India

HOME PAGE: http://www.shantibschool.edu.in

Kandarp Patel

affiliation not provided to SSRN ( email )

No Address Available

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