Ownership Structure, Related Party Transactions, and Firm Valuation Evidence from Indian Business Groups

Concentrated ownership is considered to be the best protection for shareholders in economies where legal protection is relatively weak. This book investigates and concludes, for Indian business groups, that concentrated-inside ownership provides opportunities for the expropriation of minority shareholders. While more concentrated direct ownership of controlling families results in a higher market value of equity, indirect ownership obtained through cross-holding provides incentives to extract private benefits and results in value loss. This finding requires the prompt attention of regulatory bodies, outside investors and other interested parties. This book examines the effect of ownership structure and disclosure of related-party transactions on firm valuation of group-affiliated firms in India, by using a sample of 317 listed firms comprising 1350 firm-year observations from 2008 to 2017. Well-accepted value-relevance models are employed to examine the effect of ownership rights on market value of equity and valuation effect of RP trading, asset transfer, investment and loan transactions.

List of tables; 1. Introduction; 2. The evolution of business groups, institutional framework in India and related party transactions; 3. Theory and literature review; 4. Hypotheses development; 5. Research methods; 6. Descriptive statistics; 7. Empirical results; 8. Additional tests; 9. Implications of the study and conclusion; Appendix 1. List of sample firms; Appendix 2. List of business groups; References; Index.

Amrinder Khosa is Lecturer at the Business School, Monash University, Victoria. His research interests are accounting education, corporate governance in group-affiliated firms and related-party transactions.
Kamran Ahmed is Professor of Accounting at the Business School at La Trobe, Victoria. His research interests are corporate disclosure, corporate accounting policy choice, earnings management, international accounting harmonization, accounting and reporting practices in South Asia, and microfinance reporting.
Darren Henry is Associate Professor of Finance at the Business School at La Trobe University, Victoria, and Head of the Department of Economics and Finance. His research interests include all aspects of mergers and acquisitions, corporate governance and wider ownership and control issues, corporate restructuring and cross-listing activities, and empirical corporate finance issues such as capital structure decision-making, dividend policy and capital raising activities.