A Note on the Efficacy of the Current Corporate Governance Regulations in India
29 Pages Posted: 30 Sep 2013
Date Written: September 29, 2013
Unlike the central governance issue in the Anglo Saxon world, which is essentially that of disciplining management that may stop being accountable to the owners, who usually are dispersed shareholders, the central challenge in corporate governance in India is that of disciplining the dominant shareholder and protecting the interest of the minority shareholders.
Besides family ownership, other forms of domination, such as domination by government or a foreign group, also exist in Indian organizations. Additionally, often promoters of companies exercise influence that is disproportionate to their actual shareholding.
Our study finds that differences in the nature of the dominating shareholder(s) result in significant differences in the firm’s corporate governance characteristics and in firm performance. These differences lead to serious doubts on the efficacy of a uniform, prescriptive corporate governance code – as is being attempted in India.
The need for deeper research, leading to fresh insights that would help in developing a more effective policy for corporate governance, is emphasized.
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