Please use this identifier to cite or link to this item: https://ir.iimcal.ac.in:8443/jspui/handle/123456789/957
Title: Ownership concentration and stock returns: Evidence from family firms in India
Authors: Hegde, Shantaram P.
Seth, Rama
Vishwanatha, S. R.
Keywords: Abnormal returns
Corporate governance
Family firms
Ownership concentration
Product market competition
Issue Date: 2020
Publisher: SCOPUS
Pacific Basin Finance Journal
Elsevier B.V.
Series/Report no.: 61
Abstract: Public family firms in India represent an interesting case of relatively high ownership concentration combined with high growth opportunities, less competitive product markets and less developed capital markets. Investigating the relationship between ownership concentration and stock market performance, our initial analysis indicates insignificant average abnormal stock returns at low levels of family holdings but weak positive performance at high levels of ownership in the full sample of family and non-family firms and the family subsample. These aggregate results appear robust to alternative metrics of abnormal performance, controls for founder, descendant, and outside CEOs. Further analysis of subsamples of less and more competitive product markets indicates that while the vast majority of family firms enjoying high growth opportunities in less competitive market environments exhibit poor performance at lower ownership levels, those firms with higher family holdings are associated with significantly positive abnormal returns. However, the relation between family ownership and firm valuation under high growth prospects becomes insignificant for a much smaller fraction of firms facing high product market competition. Overall, our results are consistent with the hypothesis that positive alignment of interest effects offset family entrenchment effects on firm performance at high levels of ownership concentration common in India where most firms face high growth opportunities and less product market competition. These results challenge the evidence in western developed economies marked by relatively weaker growth rates and stronger product market rivalry that the performance of family firms tends to decline at high ownership concentration due to entrenchment.
Description: Shantaram P. Hegde, University of Connecticut, Storrs, United States; Rama Seth, Copenhagen Business School, Denmark, Indian Institute of Management Calcutta, India; S. R. Vishwanatha, Shiv Nadar University, India
ISSN/ISBN - 0927538X
DOI - 10.1016/j.pacfin.2020.101330
URI: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85084194980&doi=10.1016%2fj.pacfin.2020.101330&partnerID=40&md5=220a23f4363f6a59ed39e7437d7f2cc5
https://ir.iimcal.ac.in:8443/jspui/handle/123456789/957
Appears in Collections:Finance and Control

Files in This Item:
There are no files associated with this item.


Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.