Empirical works based on ownership structure and its impact on firm performance have been limited and inconsistent when observed from the perspective of an emerging economy like India. Hence, in this study, we attempt to test the impact of ownership structure on Indian firms’ corporate performance, post the US financial crisis of 2008. In our study, it is found that Indian listed firms have high ownership concentrations. This observation was also indicated by La Porta et al. (1999) who mentioned that most developing economies possess companies with concentrated ownerships. Despite the fact that high ownership concen- tration prevails in the Indian context, there seem to be no significant impact on firms’ financial performance (ROA) although it has a negative impact on the market performance (MC). Based on this, it is deduced that large shareholders do not enhance firm performance, post US financial crisis 2008.
Our second model tests the causal relationship between ownership identities and the listed firms’ performance. It is observed that the promoters, foreign institutional ownership and domestic institutional ownership have significantly boosted the financial performance of Indian companies, post the US financial crisis. This indicates that owners have strongly monitored the management and decision-making process to make their firms more efficient and profitable. Subsequently, it is also noted that only foreign institutional investments have significantly affected the market capitalisation of the Indian companies, post the US financial crisis. In this regard, it is inferred that the confidence and continuous investments from foreign institutions had assisted in propelling the investors’ sentiments in the Indian market.
From the results and findings generated, it is deduced that this study has made several contributions and implications. First, our study is based on the ownership structure in the Indian context, hence the outcome would be enriching the governance literature of the emerging markets. Further, the outcome would be beneficial to researchers, policymakers, managers and practitioners as they add to a better understanding of the corporate ownership structure in the Indian market. The findings of this study would also clarify the impact of ownership concentration and identities on the Indian listed firms’ performance. The outcome generated may also ease policymakers need to formulate favourable policies, such as rewarding of tax incentives, hassle-free investment policy, insuring of investments, checking of fraudulent trading activities, proper monitoring of the listed firms’ governance policies and ensuring the proper audit of firms’ annual reports. These could induce investors’ participation in the capital market. These results would be able to guide corporate managers in understanding the effect of ownership holdings on corporate perfor- mance, thereby motivating investors to better corporate performance. Finally, the equity investors would be able to understand the causes of the market performance variations; hence, they would be able to decide better on their investments or divestments.
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