Corporate governance in India: Towards a more holistic approach

Type Working Paper
Title Corporate governance in India: Towards a more holistic approach
Author(s)
Publication (Day/Month/Year) 2011
URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1899512
Abstract
n this paper, we offer a ‘holistic’ approach to the development of corporate governance solutions in India that takes into account the unique economic, political and structural problems affecting the country. Based on a review of the patterns of ownership and control of its firms, we identify that the ‘core’ economic problem affecting corporate governance in this country today is not the threat that managers act opportunistically against owners, as is prevalent in the Anglo-American world, but the threat that majority shareholders act opportunistically against minority shareholders, thus calling for a new approach to address the Indian context. In developing this approach, we are mindful of the ‘transplant’ effect that recognizes that solutions adopted from ‘outsider’ jurisdictions are unlikely to be effective in ‘insider’ jurisdictions such as India since they address a different agency problem. We then identify limitations in the institutions of public enforcement in India and draw upon the ‘political’ approach to corporate law to conclude that these structural constraints are likely to continue in the short term, thus limiting the effectiveness of purely ‘legalistic’ solutions in the country. We thereafter develop criteria that enable us to arrive at potential market-based ‘self-enforcing’ solutions to our ‘core’ corporate governance problem.

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