Ownership Concentration Of Indian Companies

INTRODUTION

The shareholding example of Indian companies has been the topic of academic reviews, which have reliably demonstrated that Indian companies are controlled generously by controlling shareholders (or promoters) who hold a critical rate of shares out in the public listed companies. The promoters go from business families to the state and to multinational corporations (MNCs).[1] A later review looks at the ownership concentration levels in the course of the most recent decade.[2]

CORPORATIONS AND THEIR EVOLUTION IN INDIA

Looking back at the transformative history of the corporation as known today, one could observe no less than three major characterizing developments.[3] To start with was the first artificial creation of the corporate element by a legitimate sleight, trailed by the presentation of limited liability, the acknowledgment of the companies entitlement to put resources into and hold supply of another partnership, and at long last, the move from majority rule to plutocratic voting rights, moving far from one vote per shareholder[4] to one vote for each share and thus to considerably more skewed differential voting rights.[5]

The second evolution was the emergence of public credit corporation which represented a paradigm shift in the business that could be scaled up under which the owners of a slice of a corporation at neither claims to the property of their company in the obligation to be the permanently wedded of the share holding.[6] “As Berle and Means (1932, pp. vii-viii) pointed out some eighty years ago, this development transformed significant proportions of the nation’s industrial wealth from essentially individual ownership to corporate ownership, in the process changing the lives of property owners and workers, and in fact even the very concepts of property ownership, ushering in virtually a new format of economic organization”.[7] The third defining element of the modern corporate governance definition of Corporate board itself.[8] As we have seen that the board is elected by the shareholders and the road which is elected is virtually as its own arbitrator which is related to the all the matters of the company.[9]

The managerial model of cooperation relevant is in the United States of America and United Kingdom which includes the disposed ownership and avoids the demerits of the dominant ownership which can often be seen in exhibit agency cost which arises from the fundamental non- congruence.[10]

OWNERSHIP TRENDS ALL AROUND THE WORLD

As stated about that corporate ownership is dominated by the studies as focused on United States and United Kingdom which includes predominantly dispersed ownership structures.

“Studies by La Porta, et al (1999) of other economies and more recently by Aguilera et al (2011) of firms in emerging markets have found concentrated ownership as a general pattern in most other world economies. The La Porta study which included firms from 27 developed countries concluded that only 30% of the firms showed dispersed ownership. Although Japan in this study returned dispersed ownership because of direct ownership not being higher than 20% ( the study cut-off criterion), in effect the country qualified as concentrated ownership geography because of predominant inter-corporate holdings. Aguilera et al (2011) also found significant ownership concentration, either in the form of holdings by corporate bodies, individuals or the state in their study of corporations in South America”.[11]

OWNERSHIP PATTERNS IN INDIA

The ownership pattern in India is predominantly concentrated in the hands of domestic individuals and Promoter groups.[12] This includes multinational parents or the state. The domestic holding would be tracked back in the British managing agency where India enabled British Merchant in some Indian Businessman to spawn the different Enterprises which eventually could you are becoming the giant corporations in their own right. Many of these agencies are acquired by Indian groups.[13]

CONCENTRATED OWNERSHIP VS. DISPERSED OWNERSHIP

The classical agency of the separation of ownership is commonly associated with dispersed ownership. In India the name of the concentrated ownership is in the hand of promoter’s horizontal agency which is more prevalent.

VOTING RIGHTS

Voting rights are the index of efficiency of ownership rights. In the early 19th century voting rights were followed by the principle of suffrage rather than on the principle of property. “Countries such as Netherlands, Sweden and France had in excess of 60% of their companies listed on the FTSE with multiple voting rights, clearly an oligarchic rather than a democratic principle. In India, company legislation had prohibited issue of shares with differential voting rights right until the end of the twentieth century and then amended the law to permit them; though this practice is not very common and the number of companies with such provisions is relatively small. The Companies Act 2013 does away with this concept altogether again”.[14]

SUMMARY         

Concentrated ownership has predominant share holding pattern in India. Controlling of shareholders has increased substantially and with this increased Holdings have also increase as a result NIFTY domestic companies are being strengthen under which large Holdings are in the junior NIFTY[15] domestic companies.[16] The foreign companies are strengthened by the entrance mint with the medium holdings which was running through 50% of right. The government policy was changed which led to the open Business sectors for majority of foreign direct investment which may lead to the contributing factor for the decline in the number of the listed companies.[17] The Government companies witnessed a decline in the non institutional share holding with the study period showing the corresponding increasing.


[1] A Study on Ownership Concentration in Indian Companies, A Study on Ownership Concentration in Indian Companies (2014), http://indiacorplaw.blogspot.in/2014/04/a-study-on-ownership-concentration-in.html (last visited May 6, 2017).

[2] Id.

[3] Wright, P., Ferris, S. P., Sarin, A., &Awasthi, V. (1996), “Impact of Corporate Insider, Blockholder, and Institutional Equity Ownership On Firm Risk Taking”, Academy Of Management Journal, 39(2), 441-46.

[4] Strine Jr.,Leo E (2006),Towards a True Corporate Republic: A Traditionalist Response to Lucian’s Solution for Improving Corporate America, Harvard Law and Economics Discussion Paper, No 541.

[5] Patterns of corporate ownership: evidence from BSE-200 Index companies., Patterns of corporate ownership: evidence from BSE-200 Index companies. (2009), http://www.freepatentsonline.com/article/Paradigm/238426581.html (last visited May 6, 2017).

[6] Stout, Lynn A (2012), New Thinking on Shareholder Primacy, Accounting, Economics, and Law: A Convivium, Vol2, Issue 2, Pages 1-23, ISSN (Online) 2152- 2820.

[7] Roe, Mark J., (2004), “The Institutions of Corporate Governance”, Discussion Paper Series. Paper 488, Harvard Law School John M. Olin Center for Law, Economics and Business.

[8] Goodstein, J., & Boeker, W. (1991).Turbulence at the Top: A New Perspective on Governance Structure Changes and Strategic Change. Academy Of Management Journal, 34(2), 306-330.

[9] THE EFFECTS OF OWNERSHIP STRUCTURE ON CORPORATE GOVERNANCE AND PERFORMANCE: AN EMPIRICAL ASSESSMENT IN INDIA, , http://www.nfcgindia.org/pdf/ubs_for_website.pdf (last visited May 6, 2017).

[10] Id.

[11] THE EFFECTS OF OWNERSHIP STRUCTURE ON CORPORATE GOVERNANCE AND PERFORMANCE: AN EMPIRICAL ASSESSMENT IN INDIA , THE EFFECTS OF OWNERSHIP STRUCTURE ON CORPORATE GOVERNANCE AND PERFORMANCE: AN EMPIRICAL ASSESSMENT IN INDIA , http://www.nfcgindia.org/pdf/ubs_for_website.pdf (last visited May 6, 2017).

[12] Id.

[13] An Investigation of the Association between Ownership Structure and Financial Performance of Pharmaceutical Companies in India: A Panel Study, An Investigation of the Association between Ownership Structure and Financial Performance of Pharmaceutical Companies in India: A Panel Study (2015), http://www.pbr.co.in/November2015/1.pdf (last visited May 6, 2017).

[14] La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (1999). “Corporate Ownership around the World”, Journal Of Finance, 54(2), 471-517.

[15] National Stock Exchange of India.

[16] Goodstein, J., & Boeker, W. (1991).Turbulence at the Top: A New Perspective on Governance Structure Changes and Strategic Change. Academy Of Management Journal, 34(2), 306-330.

[17] Supra note 3.

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