Emerging Market Business Groups, Foreign Investors, and Corporate Governance / Tarun Khanna, Krishna Palepu.

Format:

Book

Author/Creator:

Khanna, Tarun.

Contributor:

National Bureau of Economic Research.

Palepu, Krishna.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6955.

NBER working paper series no. w6955

Language:

English

Subjects (All):

Corporate governance.

Incentives in industry.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Cambridge, Mass. : National Bureau of Economic Research, 1999.

Summary:

We examine the interaction between three kinds of concentrated owners commonly found in an emerging market: family-run business groups, domestic financial institutions, and foreign financial institutions. Using data from India in the early 1990s, we find evidence that domestic international investors are poor monitors, and that foreign institutional investors are good monitors. Whereas affiliates of those groups that attract foreign institutional investment are no more difficult to monitor than are unaffiliated firms, we find that group affiliation reduces the likelihood of foreign institutional investment. More transparent groups (where greater transparency is proxied for by a lower incidence of intra-group financial transactions) are more likely to attract such investment. We conclude that groups are difficult to monitor, and that foreign institutional investors serve a valuable monitoring function as emerging markets integrate with the global economy.

Notes:

Print version record

February 1999.