Edited by Jennifer G. Hill and Randall S. Thomas
Chapter 27: Shareholder power in India
A casual observer of the Indian economy might be excused for believing that shareholder power is on the rise in the subcontinent. As the story goes, Indian firms are starting to feel the effect of forces that have buffeted corporate managers in the West: the rising influence of institutional investors, proxy advisors, hedge funds, and activist shareholders. Moreover, recent corporate governance reforms in India are closely patterned on regulatory initiatives from countries where shareholders have loud voices. The push for reforms like greater information disclosure and director accountability implicitly relies on a meaningful body of outside shareholders to monitor the news and guard against managerial agency costs. But a careful look at the underlying composition of equity ownership in India suggests that the exact opposite is true: India can best be understood as a stable counter-example to the alleged global trend towards shareholder activism. Indeed, most of the evidence suggests that outside shareholder power remains, for all practical purposes, largely irrelevant for major Indian firms. The ownership structure of India’s largest public corporations continues to be skewed toward controlling inside shareholders – a legacy of family-owned business ventures and state nationalization.
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