Foreign Ownership and the Enforcement of Corporate Governance Reforms

51 Pages Posted: 1 Feb 2021

See all articles by Bibek Bhatta

Bibek Bhatta

Queen's University Belfast

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School

Suman Neupane-Joshi

University of Queensland - Business School

Chandra Thapa

University of Strathclyde

Date Written: January 29, 2021

Abstract

This study examines whether a stronger corporate governance enforcement regime influences the investment decisions of foreign portfolio investors in an emerging market context. Using a natural experiment provided by an Indian corporate governance regulatory reform introduced in 2000, but for which stricter sanctions for non-compliance were imposed in 2004, our results provide evidence that governance reforms that include stricter sanctions for non-compliance lead to higher foreign ownership. In the context of prevalence of weak enforcement (of existing regulations) in emerging markets, this study provides empirical support to the notion that strictly enforcing the existing governance regulations has the potential to attract higher level of foreign investment. The results suggest that policy measures aimed at attracting foreign investors in emerging markets should not only concentrate on adopting the best international corporate governance practices but should also signal strong enforcement of these regulations by assigning significant penalties for non-compliance.

Keywords: corporate governance reform, stricter sanctions, foreign equity ownership, panel data, difference-in-differences

Suggested Citation

Bhatta, Bibek and Marshall, Andrew P. and Neupane-Joshi, Suman and Thapa, Chandra, Foreign Ownership and the Enforcement of Corporate Governance Reforms (January 29, 2021). QMS Research Paper 2021/02, Available at SSRN: https://ssrn.com/abstract=3775422 or http://dx.doi.org/10.2139/ssrn.3775422

Bibek Bhatta (Contact Author)

Queen's University Belfast ( email )

25 University Square
Belfast, BT7 1NN
Ireland

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 548 3894 (Phone)

Suman Neupane-Joshi

University of Queensland - Business School

Brisbane, Queensland 4072
Australia

Chandra Thapa

University of Strathclyde ( email )

16 Richmond Street
Glasgow 1XQ, Scotland G1 1XQ
United Kingdom

HOME PAGE: http://https://www.strath.ac.uk/staff/thapachandradr/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
28
Abstract Views
182
PlumX Metrics