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Corporate Governance, Institutional Ownership and Firm Performance in Indian State-owned Enterprises

Corporate Governance, Institutional Ownership and Firm Performance in Indian State-owned Enterprises Corporate governance norms were prepared with the assumption that the companies are controlled by private players. However, countries such as India also have listed firms that are majority owned by the state/government. The literature on corporate governance has highlighted the differences in the governance practices of the state-owned enterprises and private-owned enterprises. This article analyses the relationship between corporate governance practices of listed state-owned enterprises in India with institutional ownership and the firm performance. The article measures the corporate governance practices of the listed Indian state-owned firms through a standard instrument to arrive at corporate governance scores. The article first analyses the relationship of corporate governance scores with the firm performance measured through the profitability parameter. The results indicate that corporate governance and firm performance share a positive relationship, which is in line with the expectations. However, the relationship between corporate governance practices and institutional ownership is negative, indicating that increasing institutional ownership is negatively affecting the corporate governance practices of the state-owned firm. This result calls for further research in this area as it deviates from the results of the studies done in the context of family-owned firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Journal of Management Research and Innovation SAGE

Corporate Governance, Institutional Ownership and Firm Performance in Indian State-owned Enterprises

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Publisher
SAGE
Copyright
© 2015 Asia-Pacific Institute of Management SAGE Publications
ISSN
2319-510X
eISSN
2321-0729
DOI
10.1177/2319510X15576273
Publisher site
See Article on Publisher Site

Abstract

Corporate governance norms were prepared with the assumption that the companies are controlled by private players. However, countries such as India also have listed firms that are majority owned by the state/government. The literature on corporate governance has highlighted the differences in the governance practices of the state-owned enterprises and private-owned enterprises. This article analyses the relationship between corporate governance practices of listed state-owned enterprises in India with institutional ownership and the firm performance. The article measures the corporate governance practices of the listed Indian state-owned firms through a standard instrument to arrive at corporate governance scores. The article first analyses the relationship of corporate governance scores with the firm performance measured through the profitability parameter. The results indicate that corporate governance and firm performance share a positive relationship, which is in line with the expectations. However, the relationship between corporate governance practices and institutional ownership is negative, indicating that increasing institutional ownership is negatively affecting the corporate governance practices of the state-owned firm. This result calls for further research in this area as it deviates from the results of the studies done in the context of family-owned firms.

Journal

Asia-Pacific Journal of Management Research and Innovation – SAGE

Published: Jun 1, 2015

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