Patterns of Corporate Ownership: Evidence from BSE-200 Index Companies

Abstract

Theoretical and applied work on corporate governance systems point to the importance of the structure of ownership and control in setting the background for corporate governance issues that can arise in reality. The present study discerns ownership pattern for BSE-200 Index companies for six financial years, i.e., 2000-6. The results suggest that Indian companies typically maintain their shareholding pattern over time. This is especially true for the overall proportion of shares held by promoters and non-promoters. Although India has a tradition of equity ownership by promoters, a phenomenon of institutionalization of wealth wherein institutional investors especially foreign institutional investors are consolidating their holdings is quite apparent. Evidence shows insignificant shareholding of individuals and fall in the proportion of outstanding shares held by institutions comprising banks, insurance companies, and corporate bodies from 2001 to 2006. Further, the ownership concentration both in terms of the fraction of shares held by the largest shareholders and Herfindal index increased for the average company over the study period. The paper concludes by suggesting that efforts to raise corporate governance standard needs to be accompanied by a stronger egal enforcement so as to bring stability in its capital markets and foster investor confidence.