Ownership Structure and Corporate Performance in India

Abstract

The ownership structure of a publicly held Corporation is one of the internal mechanisms of corporate governance. Insider ownership is one of the internal controlling mechanisms that could theoretically reduce agency costs. Earlier researcher has investigated the effects of insider ownership on firm performance. But we have attempted to add few more dimensions to it. Firstly, earlier studies did not attempt to study this relationship after the implementation of revised corporate governance code in 2006 in India and after the changes in the disclosures of insider ownership as per the clause 49 of the listing agreement. Secondly, earlier studies did not take into account the time lag for the studies on Indian markets. We have attempted time lag studies using panel data on the Indian Markets using MBVR ratio as a performance measure. The result shows that corporate performance is significantly influenced by insider ownership. Hence corporate governance issues needs to be dealt with great care.Â