Securities And Exchange Board Of India Research Articles

Financial awareness, risk aversion and portfolio choice

ABSTRACT “The financial market participation puzzle remains one of the most explored yet unanswered areas in finance. We extend the debate of portfolio choice by examining stock and derivatives market participation by focusing on two key investor traits: financial awareness and risk aversion. We use an investor survey conducted by the Securities and Exchange Board of India (SEBI), covering over 15,000 Indian investor responses. We find that risk aversion is associated with a 20% lower probability of market participation, whereas risk-averse individuals having high financial awareness are around 3.3% more likely to participate in financial markets. Furthermore, financial awareness and risk aversion are more significant in areas with higher economic freedom and lower social capital. Our findings suggest that policymakers may consider tailored financial awareness programmes based on differences in risk aversion among the investors as both these characteristics have a combined relationship with financial market participation.

A BRIEF STUDY ON STOCK MARKET

The Indian stock market has undergone a remarkable transformation over its century-long history, emerging as a dynamic and sophisticated financial ecosystem that plays a pivotal role in driving the nation's economic growth. With securities traded on prominent exchanges like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), the market serves as a vital platform for capital allocation and investment. Regulated by the Securities and Exchange Board of India (SEBI), it exhibits inclusivity, welcoming a diverse spectrum of participants, from retail investors to institutional funds. Despite facing challenges such as volatility and regulatory compliance, the Indian stock market remains resilient, offering ample opportunities for wealth creation and economic development. Through a comprehensive exploration of its historical evolution, regulatory framework, market participants, and performance metrics, this report aims to provide valuable insights for investors and stakeholders, shedding light on emerging trends and opportunities in the Indian financial landscape.

Investors’ perception towards investor protection measures taken by the government of India and SEBI: an ordinal approach

Purpose This study aims to determine experimentally factors affecting the satisfaction of retail stock investors with various investor protection regulatory measures implemented by the Government of India and Securities and Exchange Board of India (SEBI). Also, an effort has been made to gauge the level of satisfaction of retail equities investors with the laws and guidelines developed by the Indian Government and SEBI for their invested funds. Design/methodology/approach To accomplish the study’s goals, a well-structured questionnaire was created with the help of a literature review, and copies of it were filled by Punjabi retail equities investors with the aid of stockbrokers, i.e. intermediaries. Amritsar, Jalandhar, Ludhiana and Mohali-area intermediaries were chosen using a random selection procedure. Xerox copies of the questionnaire were given to the intermediaries, who were then asked to collect responses from their clients. Some intermediaries requested the researcher to sit in their offices to collect responses from their clients. Only 373 questionnaires out of 1,000 questionnaires that were provided had been received back. Only 328 copies were correctly filled by the equity investors. To conduct the analysis, 328 copies, which were fully completed, were used as data. The appropriate approaches, such as descriptives, factor analysis and ordinal regression analysis, were used to study the data. Findings With the aid of factor analysis, four factors have been identified that influence investors’ satisfaction with various investor protection regulatory measures implemented by government and SEBI regulations, including regulations addressing primary and secondary market dealings, rules for investor awareness and protection, rules to prevent company malpractices and laws for corporate governance and investor protection. The impact of these four components on investor satisfaction has been investigated using ordinal regression analysis. The pseudo-R-square statistics for the ordinal regression model demonstrated the model’s capacity for the explanation. The findings suggested that a significant amount of the overall satisfaction score about the various investor protection measures implemented by the government/SEBI has been explained by the regression model. Research limitations/implications A study could be conducted to analyse the perspective of various stakeholders towards the disclosures made and norms followed by corporate houses. The current study may be expanded to cover the entire nation because it is only at the state level currently. It might be conceivable to examine how investments made in the retail capital market affect investors in rural areas. The influence of reforms on the functioning of stock markets could potentially be examined through another study. It could be possible to undertake a study on female investors’ knowledge about retail investment trends. The effect of digital stock trading could be examined in India. The effect of technological innovations on capital markets can be studied. Practical implications This research would be extremely useful to regulators in developing policies to protect retail equities investors. Investors are required to be safeguarded and protected to deal freely in the securities market, so they should be given more freedom in terms of investor protection measures. Stock exchanges should have the potential to bring about technological advancements in trading to protect investors from any kind of financial loss. Since the government has the power to create rules and regulations to strengthen investor protection. So, this research will be extremely useful to the government. Social implications This work has societal ramifications. Because when adequate rules and regulations are in place to safeguard investors, they will be able to invest freely. Companies will use capital wisely and profitably. Companies should undertake tasks towards corporate social responsibility out of profits because corporate houses are part and parcel of society only. Originality/value Many investors may lack the necessary expertise to make sound financial judgments. They might not be aware of the entire risk-reward profile of various investment options. However, they must know various investor protection measures taken by the Government of India & Securities and Exchange Board of India (SEBI) to safeguard their interests. Investors must be well-informed on the precautions to take while dealing with market intermediaries, as well as in the stock market.

Share Price Sensitivity Towards Dividend Announcement on Nifty Listed Companies

Dividend announcement is one of the key factors that influences the fluctuation in the share prices. The dividend is the cost of capital to equity shareholders. In recent years the securities and exchange board of India (SEBI) has initiated a number of reforms to make the Indian stock market at par with developed stock markets of the world. Dividend signals information to investors about the firm’s future performance. The impact of dividend announcements on share prices is likely to vary depending on the specific circumstances of each company and the overall market environment. On the one hand, dividend announcements can signal to investors that a company is financially strong and has a positive outlook for the future. The purpose of this project is to observe whether dividend announcement has impact on share prices of the Nifty listed companies. The objective of this study is to know the impact of dividend announcement on share price in Nifty Listed Companies. In order to achieve the objective of the study, the secondary data was collected through NSE Website. After the data collection, the data was analysed using Paired t-Test. The major findings from the project are few of the companies show impact of Dividend Announcement while most companies don’t show impact of Dividend Announcement. So, it can be concluded that the overall, there is no impact of Dividend Announcement on Share price of Nifty Listed Companies. Investors should carefully consider a company’s overall financial health, dividend policy and long-term growth prospects before making investment decisions based on dividend announcements.

INITIAL PUBLIC OFFERINGS IN INDIA – A STRUCTURAL REVIEW

<p>This research offers a comprehensive analysis of the structural aspects of Initial Public Offerings (IPOs) in India, covering the period from the pre-liberalization era to the current time. The research paper examines the IPO landscape in India, a vibrant economy in Asia, by gathering a comprehensive dataset from various sources, including the Securities and Exchange Board of India (SEBI) archives, financial reports, and other pertinent sources. It analyzes the evolutionary patterns, regulatory changes, and significant events that have influenced the development of IPOs in the country. The primary findings indicate that regulatory changes, economic growth trajectories, and global financial conditions have significantly influenced initial public offerings (IPOs) volume and valuation. The research methodology involved meticulous data collection from reputable academic databases, primarily Mendeley and Scopus, spanning over five decades. This extensive dataset forms the foundation for our robust and insightful analysis. The study additionally emphasizes the significance of India's distinctive socio-economic structure, which has enabled and restricted the advancement of the capital market. By conducting a comparative analysis between India's framework and worldwide best practices, this study aims to identify areas of convergence and divergence. The paper finishes by providing policy proposals that enhance the resilience and inclusiveness of the Indian Initial Public Offering (IPO) market for a diverse range of issuers and investors.</p><p><strong> </strong></p><p><strong>JEL</strong>: O10, O16</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0016/a.php" alt="Hit counter" /></p>

SEBI: As a Regulator of Capital Market

The Securities and Exchange Board of India (SEBI) stands as a formidable regulator, ensuring transparency, fairness, and investor protection in India's capital markets. Established in 1988, SEBI's multifaceted roles include formulating regulations, promoting investor education, surveilling market activities, and fostering corporate governance. Through its vigilant oversight of market intermediaries and dynamic adaptation to emerging challenges, SEBI has been a cornerstone in shaping a resilient and vibrant financial landscape in India.

A Study to Identify the Commodity Characteristics towards A Potential Derivative Contract on Tea

In this study, we examine the determinants of a successful derivative futures contract and explore whether an exhaustive checklist of criteria such as the one proposed by the Securities and Exchange Board of India (SEBI) guarantees the success of a commodity contract. This study has important implications for contract design and new product launches. More market-orientated risk management mechanisms such as hedging via derivatives could allow farmers and producers to manage their risk and efficiently discover true prices. The government's vision to develop a progressive and sustainable commodities market in India is facing a fundamental issue: What makes a futures contract successful? This study attempts to analyse this question. Academics and policymakers have long deliberated on the conditions that make a contract successful. This study revisits those conditions in the context of Indian agricultural futures contracts and assesses the dispositions made by the SEBI’s long list of criteria as well as insights from prior studies about the determinants of a successful contract. Tea satisfies almost all the criteria with either first or second rank among the three compared products. Therefore, we can conclude that Tea has the necessary and potential characteristics for introduction in the Commodity Derivative Market of India and progress forward as a successful commodity

The Intersection of Cryptocurrencies with Securities Law

The Intersection of Cryptocurrency and Securities Law has been discussed in various legal contexts in the present scenario. The rise of cryptocurrencies has put forth fresh challenges for investors as well as regulators and there is a need for clear direction on how to interpret the transactions that include digital currencies. The advent of crypto exchanges has formed an entire ecosystem of services and participants, who are looking to provide liquidity, exploit price differences for profit, and support the investments. The focus of the study is to investigate the legal and regulatory steps taken to include cryptocurrencies within securities law. The paper will delve into the distinctive attributes of cryptocurrencies and analyse the different regulations in which they can be classified as securities. Moreover, it will inspect the fluctuating regulatory strategies adopted by various countries and entities, such as the United States Securities and Exchange Commission (SEC), United Kingdom’s Financial Conduct Authority (FCA), The Australian Securities and Investments Commission (SIC), Securities and Exchange Board of India (SEBI) and others.

Corporate Governance Practices in India: Problems & Importance

The paper seeks to explore the impact of corporate governance (CG) measures on the performance, importance and problems from the viewpiont of India.The focus on corporate governance has increased since the past few decades in most countries around the world, especially in the wake of corporate collapses in early 2000s. These corporate collapses have leads to the growing volume of academic and practical research in this area. Corporate governance refers to the set of rules and practices that ensure the effective and corporate efficient management of a company. In India, the Companies Act, 2013 lays down the legal framework for corporate governance, which is overseen by the Securities and Exchange Board of India (SEBI) and other regulatory authorities. Some of the key corporate governance practices in India include: Board of Directors: Companies in India are required to have a board of directors that oversees the management of the company. The board is expected to act in the best interests of the company and its stakeholders.Independent Directors: At least one-third of the board of directors of a listed company in India must be independent directors. These directors are expected to provide unbiased and objective advice to the board. Audit Committees: Listed companies in India are required to have an audit committee that oversees the financial reporting process and ensures that the company's financial statements are accurate and reliable. Shareholder Rights: Shareholders in India have a number of rights, including the right to vote on key issues such as the election of directors and the approval of major corporate transactions. Disclosure and Transparency: Indian companies are required to disclose a wide range of information to the public, including financial statements, annual reports, and information about the company's management and operations. In this paper we will study the concept and principles of corporate goverbance along with its importance from the viewpoint of India. Then we will discuss the various issues and challenges related to corporate governance.

Lux Industries Limited: a case of insider trading

Learning outcomes After reading the case, the students shall be able to explain the concept of insider trading and differentiate between illegal insider trading and legal insider trading, business ethics, financial institutions, financial markets and accounting; to interpret the legal framework for prevention of insider trading; to identify the role and significance of the market regulator, Securities and Exchange Board of India (SEBI), in detecting financial crimes such as insider trading; to demonstrate the association between information, stock trading and stock prices within the framework of efficient markets; and to appraise the ethical dilemma in a family-owned firm, where the family members of the promoter group are alleged to have indulged in a financial crime. Case overview/synopsis The case revolves around allegations of insider trading against the promoter and the promoter group of the family owned and controlled firm, Lux Industries Limited. On January 24, 2022, the SEBI, the regulator of securities markets in India, accused Udit Todi, the Executive Director of Lux Industries Limited, of engaging in insider trading through a chain of 14 connected parties. Udit Todi was also the son of the Managing Director, Pradip Kumar Todi, and the nephew of the Executive Chairman, Ashok Kumar Todi. In its interim order, SEBI alleged a breach of insider trading regulations by a group of 14 connected entities that had built up long positions starting from May 21, 2021, before the quarterly financial results (Q4) and the annual results of the financial year (FY) 2021 in the equity shares of Lux Industries Limited, with its registered office in Kolkata, India, were announced. Subsequently, they squared off the long positions to make a profit of ₹29.43m. To restore the confidence of the investors, the Executive Chairman, Ashok Kumar Todi, needed to review the matter expeditiously and impartially. Taking into consideration the family ties of the accused, it was not going to be an easy task, yet, it had to be done. The case highlights the role of the regulator, SEBI, in unearthing financial frauds such as insider trading in an emerging market such as India. Complexity academic level Postgraduate programs in management, Executive education programs. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and Finance

ESG Reporting: Environmental Dimension Disclosures by Large Energy Sector Companies in India

Reporting about the Environmental, Social and Governance (ESG) dimensions of the business is fast becoming the norm for corporates the world over. Climate change is seen as the largest threat to the achievement of the UN Sustainable Development Goals. Given the importance of the energy sector and the impact it has on the environment, it was decided to explore the Environmental Dimension Disclosures (EDD) by the large energy sector (comprising of oil and gas; coal and power) companies in India. For this, content analysis of those energy sector companies was performed which have filed their Business Responsibility and Sustainability Reports (BRSR) with the National Stock Exchange of India. Filing of BRSR has been mandated for the largest 1000 companies in India by the Securities and Exchange Board of India (SEBI) from the Financial Year 2022-2023 but was voluntary for the first year (2021-2022). The study provides a detailed analysis of which questions of the BRSR relating to the environmental dimension are answered and how. The main limitation of the study is that it does not include some of the large energy sector companies since they have not filed their BRSR as it was voluntary this year. However, the detailed analysis of reporting on the environmental issues such as reduction achieved in the energy and water intensity and GHG, other emissions and waste generated with reference to turnover, has implications for policies on these disclosures including sector-specific guidelines. This is the first study based on a detailed qualitative analysis of BRSR.

Regulatory actions against corporate irregularities in India: analyzing the stock market impact

In this article, I use a unique dataset consisting of listed Indian firms that have been indicted for economic malpractice/default or have been non-compliant with laws/ regulations/ guidelines to estimate the stock price impact of regulatory actions against corporate irregularities. The sample consists of regulatory charges imposed by two major Indian regulators, (i) the Ministry of Corporate Affairs (MCA) and (ii) the Securities and Exchange Board of India (SEBI). I find that regulatory actions are an effective deterrence against corporate misconduct and have a significantly negative impact on a firm’s stock price. The level of negative effect on the stock price of a firm is directly related to the severity of regulatory charges against it, i.e., cases of fraud or cheating, or payment default attract a much more negative reaction as compared to cases such as failure to disclose information, other non-compliance, etc. Finally, the results indicate that younger and less profitable firms have a higher (more negative) stock price reaction to regulatory action announcements.

Examining the Impact of Regulation on Equity Multi-Cap Funds in India

Economic growth is facilitated by a sound financial system. “Mutual funds are one of the main sources of capital flows to emerging economies”. “The Securities and Exchange Board of India (SEBI) is the highly powerful capital market regulator in the country and it regulates mutual funds”. The regulatory mechanism for mutual funds is quite strong in India. 11th September 2020 is a significant day for equity multi-cap funds in India. SEBI came out with a circular on that day for equity multi-cap funds. The present study endeavours to critically assess the impact of that circular on equity multi-cap funds. The study is exploratory and uses secondary data. The number of equity multi-cap funds reduced drastically after the regulatory circular. Nevertheless, one notable thing is that many fund houses launched schemes under the category of equity multi-cap funds even after this circular. The results reveal that the AUM of the two big funds (Nippon India Multi-Cap Fund and ICICI Pru Multi-cap Fund) has increased and the expense ratio has decreased in February 2022 in comparison to December 2020. The returns generated by these funds were spectacular also. As such, the impact of the circular should not be treated as a negative one for equity multi-cap funds.

Development of Risk Index and Risk Governance Index: Application in Indian Public Sector Undertakings

The purpose of the paper is to develop a risk measure in the form of a risk index and a governance index as an indicator of the quality of governance structure. Using the Delphi technique, two indices are developed (risk index and corporate governance index (CGI)); subsequently, using the 10-year (2005–2015) data of top Indian Public Sector Undertakings (PSUs) and diff-GMM regression (to deal with endogeneity), indices have been validated. Though the data set may appear old, it has only been used to test the risk index and analyze the results. Empirical evidence on indices indicates that Indian PSUs have ‘moderate’ risk levels and ample scope for improvement in their governance structure. Further, a positive relation between governance index and returns and negative relation between risk index and returns lend credence to the indices developed in the study. Notably, the governance index appears to be a moderating variable in the relationship between risk and return. It is perhaps the first study to put forth a comprehensive measure of risk to measure risk levels of PSUs and prescribe a measure of the quality of governance structure. While constructing the CGI, certain non-compliances were observed, even in terms of mandatory requirements, such as the proportion of PSUs may take independent directors. The new datasets may further check for compliance and its effect on the results. Such infringements call for stringent penal provisions and better monitoring of PSUs. Further, if the normative frameworks are adhered to as per the study by the Securities and Exchange Board of India (SEBI) and Ministry of Corporate Affairs (MCA), more effective and efficient decisions with lower risks, and hassle-free management resulting in better return on assets and return on equity.

Board Characteristics and Risk Disclosure Quality by Integrated Reporters : Evidence from Indian Banks

This study aimed to analyze the influence of board characteristics on the quality of risk disclosures in integrated annual reports of banks in India. Integrated reports support organizations in controlling risks, identifying opportunities, connecting risks with business policies, developing business models, and contributing to the value creation process. In February 2017, the Securities and Exchange Board of India (SEBI) recommended the adoption of an integrated reporting (IR) framework by the top 500 companies in India on a voluntary basis from 2017–18. Considering the relevance of integrated reporting and its underlying benefits to various stakeholders, banks have primarily adopted the IR framework and started publishing their annual reports in line with the IR principles. Using content analysis on the sample of 30 banks listed on the National Stock Exchange (NSE) in India, the efficacy of risk disclosures, the outlook orientation (past, present, and future), approaches to risk (positive, neutral, and negative) were investigated, and the influence of attributes of board of directors on the quality of risk disclosure was examined. On examining 4,183 sentences concerning risk disclosures by Indian banks, the results showed a positive relationship between board size, diversity, independence, meetings, and education background in accounting/finance with risk disclosure quality (RDQ). Also, it was found that integrated reporters tended to disclose more risks and suggested ways to mitigate those risks compared to non-adopters.

Analysis of Investors’ Prediction Potential Using Holt Winters Model and Artificial Neural Networks

ABSTRACT This study analyses the predictive power of six categories of investors who traded Nifty Index future contracts on the National Stock Exchange of India (NSE). Quality data were collected from The Securities and Exchange Board of India (SEBI). Investors’ predictive potential was estimated by analysing the effect of open interest and volume traded on volatility for each category. The Holt–Winters (HW) exponential smoothing model successfully captured seasonality and provided a satisfactory analytical model for linear forecast. Nonlinearity was captured by Artificial Neural Networks (ANN). A resilient backpropagation algorithm with backtracking was used to determine the weights triggered by a logistic activation function for smoothing neurons. The multilayer perceptron network was further trained for time series data on volatility considering volume and open interest as input neurons. Predictive powers were considered best for the method with the least Root Mean Square Error (RMSE). The results suggest that nonlinearity in the data was well captured by the ANN as the RMSE for the ANN was smaller compared to the RMSE for the HW model. The RMSE using ANN was least for Foreign Institutional Investors (FIIs) that suggests that FIIs have better prediction potential compared to other investors.

THE INFLUENCE OF GROUP AFFILIATION ON IPOS PERFORMANCE: AN EMPIRICAL ANALYSIS OF INDIAN IPOS

Securities and Exchange Board of India (SEBI) keeps on improving the securities market regulations to improve investors' protection. To revive the primary market, in 2009, SEBI ICDR (Issue of Capital and Disclosure Requirements) Regulations, 2009 was amended with revised guidelines. The advantage of group affiliation and reputation on IPO performance differs with time and varied business groups. Grouped IPOs evidenced mixed outcomes based on theories developed under tunnelling, propping, network and certification hypothesis. We examine how the business group affiliation impact the underpricing, liquidity and volatility performance of IPOs. Using database of 259 IPOs issued in Indian market from 2009 to 2019, we find less underpricing, liquidity and volatility for group affiliated IPOs. The present study supports certification, network and propping hypothesis. We find underpricing extent is reduced than earlier period, average security return 12 percent while underpricing 11.79 percent is evidenced. Liquidity and volatility reported a declining trend from listing day to 1-month post listing.

Taking the Heat: (Non) disclosure of Climate Change Risks in India

Following the bankruptcy of Pacific Gas and Electric in California, a number of academic commentators, central banks and regulators are coming to the realization that climate change poses a massive threat to the existing financial markets. While numerous legislative proposals to combat the emerging threat are being discussed across the world, there has been a massive rise in securities litigation involving climate change issues, particularly in the US. As early as in 2007, some US states had begun investigating companies for deliberately misleading their shareholders through non-disclosure of climate change risks. A number of similar suits have followed, increasingly binging into question the meaning and extent of ‘material information’ in the context of capital markets. In India, the Reserve Bank of India (RBI) has identified climate change as a potential risk to the stability of the financial system, but there has been little legislative action in this regard. The Securities and Exchange Board of India (SEBI) has a provision similar to that in the US requiring all listed companies to disclose ‘material’ facts regarding their assets and value on the market, while Indian courts have long recognized that corporations as well as intermediaries on the securities market are bound by a fiduciary duty to disclose all material information to investors. Drawing a comparison with the rising trend of climate change related securities litigation in the US, this article explores whether a company failing to disclose risks associated with climate change would be in violation of the current Indian regulatory framework, and what kind of legislative changes, if any, are required to safeguard the interests of Indian investors.

The Failure of Corporate Governance at Infrastructure Leasing and Financial Services Limited: Lessons Learnt

This case study investigates multiple issues related to corporate governance, regulations, auditing and financial reporting of Infrastructure Leasing and Financial Services Limited (IL&FS). Combinations of these issues resulted in default in payment obligations by IL&FS in August 2018 originated from the agency problem. It posed a substantial systematic risk to the whole financial system of India. This case study highlights the severe drawback of concentration of decision-making and unprofessional work ethics at the senior management level. Further, the case study also provides the opportunity to discuss the inappropriate regulations and governance practices which cause a severe problem in long-standing and prominent organizations like IL&FS. Research Questions: (a) Discuss the vital role of corporate governance in major corporations and the reasons behind governance failures. (b) How did asset–liability mismatch create liquidity problems in a company which deals with long-term projects? (c) How does lack of a proper and unified regulatory framework for Non-Banking Financial Corporation (NBFC) harm investors’ interest? Link to Theory: This case study provides an opportunity to learn the role of corporate governance in NBFC. This case demonstrates the problems arisen because of agency problem and conflict of interest among real-world stakeholders. The case study also highlights the importance of assets–liabilities management in a strategically important organization like IL&FS. Phenomenon Studied: This case study attempts to understand the potential problems that occurred in IL&FS from the failure of good governance, lack of unified regulations for NBFCs and non-adherence of professional responsibilities by the external auditors. Case Context: The case study explores the vital role of the infrastructure development and financing companies in developing economies like India and how it may affect other vital entities of the financial system. Further, it demonstrates how unethical practices at senior management and lack of unified regulations can harm the organization. Findings: The research study found senior management’s potential involvement in unethical practices while managing the company. The financial statements did not reflect the true and fair picture of the entity, which misled investors and other stakeholders. It created chaos in the stock market, resulting in a loss to shareholders. The government set up a new board to restore the confidence of the stock market. Further, the government started to address the problems that arose. Discussions: The case of IL&FS by default, at first glance, looks like a case of asset–liability mismatch due to the lack of supervisory roles of the board and senior management’s massive regulatory failure. It is shocking how under the nose of regulators like Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Ministry of Corporate Affairs (MCA) a default of this scale could take place. How could IL&FS group grow unchecked into a massive 348 entity. It appeared that regulators, marquee shareholders (banks and institutions), and the board of directors failed in their fiduciary obligation to regulate and supervise IL&FS.

Issues in separating Chairman and CEO/MD roles in Family Firms: Evidence from India’s SEBI reform

This paper analyzes the issues of implementing the new corporate governance code Securities and Exchange Board of India (SEBI), which is Contract agreement reforms (Clause 49) enacted in 2018.This code has ordered Indian companies to separate the role of chairman and chief executive officer (CEO)/managing director(MD)in family firms. Not only that more severe penalties were introduced in 2020 to expand the efficacy of this enactment, the SEBI had also recommended certain companies, in the new contract agreement reform, to implement it by October 01, 2019.There exist many problems on implementation of this reform in India. The separation between the position of Chairman and CEO/MD, which may lead to more independent boards, will provide the essential checks and balances over management’s performances. But, in most Indian promoter-led companies, the posts of chairman and CEO/MD are interwoven. The promoters say that the committee did not recommend that the two posts be separated, and hope the order gets deferred for 2-3 years.A qualitative research analysis is conducted focusing on the implications of this reform on family businesses and their managing boards. Hence, this paper will analyze the present conditions, trends, and future challenges from a theoretical as well as practical perspective. Keywords:Family firms, corporate governance reforms, separated Chairman and CEO/MD, SEBI, India.