Examining the impact of promoter ownership on firm value, this study has found that promoters have positive impact on firm value in China while it is inversely related to India due to the entrenchment effect or opportunistic behaviour of the promoter.
Authors
Aghila Sasidharan, Department of Finance and Accounting, Jindal Global Business School, O.P. Jindal Global University, Haryana, Sonipat, 131001, India; Department of Financial Management, Indian Institute of Forest Management, Bhopal, India
Rahul Sukumaran, T.A. Pai Management Institute (TAPMI), Manipal Academy of Higher Education (MAHE), Karnataka, Manipal, 576104, India
Sobhith Jose, Department of Finance and Accounting, Jindal Global Business School, O.P. Jindal Global University, Haryana, Sonipat, India.
Summary
Using panel regression on a sample of 1,532 firms listed on the National Stock Exchange (NSE) of India and 450 firms in the Shanghai Stock Exchange (SSE) of China, this study examines the impact of promoter ownership on firm value.
We find that promoter have positive impact on firm value in China while it is inversely related to India due to the entrenchment effect or opportunistic behaviour of the promoter. We provide evidence that the opportunistic behaviour of the promoter can be reduced only through monitoring by the corporate governance mechanisms such as board of directors.
We contribute to the existing literature on corporate governance and corporate finance by examining the link between promoter ownership and firm value. Our results help the regulators and policy makers to formulate a regulation that reduces the opportunistic behaviour of promoters
Published by: Asian Academy of Management Journal
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