Not Available for Download

Corporate Governance, Enforcement, and Firm Value: Evidence from India

Journal of Law, Economics, & Organization, Forthcoming

Posted: 27 Feb 2012  

Dhammika Dharmapala

University of Chicago Law School

Vikramaditya S. Khanna

University of Michigan Law School

Multiple version iconThere are 2 versions of this paper

Date Written: February 26, 2012

Abstract

This paper analyzes the impact of corporate governance on firm value using a sequence of reforms in India (Clause 49) enacted in 2000, for which more severe penalties were introduced in 2004. The reforms did not apply to all firms and resulted in treatment and control groups of firms with overlapping characteristics. A difference-in-difference approach (controlling for various factors including firm-specific time trends) shows a substantial positive causal effect of the reforms in combination with the 2004 sanction increase. A regression discontinuity analysis, focusing on the thresholds for application of the reforms, leads to similar results. Across various specifications, the estimated effect is at least 6% of firm value. This effect is large, but comparable in magnitude to effects found in other studies of major corporate governance reforms, especially in emerging markets.

Keywords: corporate governance, enforcement, sanctions, firm value, tunneling

JEL Classification: G34, G38, K22, O16

Suggested Citation

Dharmapala, Dhammika and Khanna, Vikramaditya S., Corporate Governance, Enforcement, and Firm Value: Evidence from India (February 26, 2012). Journal of Law, Economics, & Organization, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2011459

Dhammika Dharmapala (Contact Author)

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

Vikramaditya S. Khanna

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-615-6959 (Phone)

Paper statistics

Abstract Views
648