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Corporate governance and investment decisions of retail investors in equity: do group affiliation and firm age matter?

Corporate governance and investment decisions of retail investors in equity: do group affiliation... The purpose of this study is to examine the impact of corporate governance (CG) on the shareholding level of retail investors in Indian listed firms.Design/methodology/approachPrimarily, a broad CG-index was constructed based on the Indian Companies Act, 2013; Clause 49 listing agreement; and Securities Contracts (Regulation) Act, 1956. Thereafter, a panel data approach has been used to examine the association between CG attributes and retail shareholdings (RSs) during 2014–2015 and 2018–2019.FindingsAuthors find that the firm-level CG quality positively affects retail investors’ shareholding level. The results explain that among various attributes of CG, retail investors pay more attention to firms’ audit and board information while making investment decisions. The results also reveal that the influence of CG attributes on RSs is lesser for group-affiliated, mature and large-sized firms than for stand-alone, young and small-sized firms.Practical implicationsFirst, the study provides new insight to the firms for increasing retail-shareholding levels and complying with India’s ongoing minimum public shareholding norms by improving CG practices concerning specific CG mechanisms. Second, it illuminates the regulators and policymakers to monitor and strengthen firms’ governance quality in light of ongoing regulatory reforms.Originality/valueThis study is a new investigation that explores the impact of CG on investment decisions of retail investors from the perspective of an emerging economy. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

Corporate governance and investment decisions of retail investors in equity: do group affiliation and firm age matter?

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References (155)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0268-6902
eISSN
0268-6902
DOI
10.1108/maj-06-2021-3177
Publisher site
See Article on Publisher Site

Abstract

The purpose of this study is to examine the impact of corporate governance (CG) on the shareholding level of retail investors in Indian listed firms.Design/methodology/approachPrimarily, a broad CG-index was constructed based on the Indian Companies Act, 2013; Clause 49 listing agreement; and Securities Contracts (Regulation) Act, 1956. Thereafter, a panel data approach has been used to examine the association between CG attributes and retail shareholdings (RSs) during 2014–2015 and 2018–2019.FindingsAuthors find that the firm-level CG quality positively affects retail investors’ shareholding level. The results explain that among various attributes of CG, retail investors pay more attention to firms’ audit and board information while making investment decisions. The results also reveal that the influence of CG attributes on RSs is lesser for group-affiliated, mature and large-sized firms than for stand-alone, young and small-sized firms.Practical implicationsFirst, the study provides new insight to the firms for increasing retail-shareholding levels and complying with India’s ongoing minimum public shareholding norms by improving CG practices concerning specific CG mechanisms. Second, it illuminates the regulators and policymakers to monitor and strengthen firms’ governance quality in light of ongoing regulatory reforms.Originality/valueThis study is a new investigation that explores the impact of CG on investment decisions of retail investors from the perspective of an emerging economy.

Journal

Managerial Auditing JournalEmerald Publishing

Published: Jan 3, 2023

Keywords: Corporate governance; Group affiliation; Retail investors; Shareholding

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