Disentangling the Performance and Entrenchment Effect of Family Shareholding: A Study of Indian Corporate Governance

Abstract

Using an econometric framework, I have tried to establish the relationship between Tobin's Q and family shareholding. While there is no unequivocal causality established by theories, empirical evidences present wide variation in findings. By controlling several firm and industry specific factors, I found a non-linear relationship between family holding and Q ratio. Many studies have raised the issue of endogeneity in governance literature as it is detrimental to the empirical observations. I have tried to address this issue via instrumental variable regression method. While in several specifications, the curvilinear aspect of the relationship remained intact; I fail to trace any endogeneity problem in ownership variables.