| dc.description.abstract | Essay 1: Private Benefits, Wealth-risk Sensitivity and Conglomeration Lifecycle as Determinants of Ownership Structure
In the first essay we investigate the cross-sectional determinants of ownership and examine the effect of wealth-risk of the owner, conglomeration, private benefits, and family particularities of control on ultimate equity ownership of the controlling owner. We use a dataset of 500 non-financial BSE listed companies in 2011. Our major findings are as follows: (1) ownership concentration is positively related to family affiliation, family activity, related party transactions (RPTs), firm value and is negatively related to the founder presence vis-à-vis the outsider in the domestic firm sample; The RPTs are also ownership agnostic in non-family Indian firms. The result seems to indicate that family is compensating higher ownership costs by some countervailing private benefits. (2) ownership concentration also decreases with increase in conglomeration and conglomeration lifecycle. Conglomeration lifecycle explains within group variation in ownership of a conglomerate; (3) ownership level also decreases with increase in wealth-risk sensitivity, which is a square of wealth-risk. With increasing ownership rate with undiversified wealth-risk and at higher ownership concentration the wealth-risk sensitivity is associated with rapid decrease in ownership; (4) capital expenditure, intangible assets, leverage, risk and operating efficiency of the firms significantly explain family particularities regarding ownership.
Essay 2: Ownership & Control Structures, Private Benefits and Firm Valuation
In this essay we address four specific issues pertaining to endogenous valuation-ownership structure relationship in a panel of 500 listed Indian firms for 2001-2011 period: the effect of different owner types; control structure employed; family influence and succession status and private benefits. We use RPTs for private benefits, conglomeration for empire building and discrepancy for control structure and non-promoters ownership structure for expropriation opportunity. We use wealth-risk sensitivity, freeriders share, relative valuation and conglomeration as instruments for endogenous ownership, discrepancy and private benefits. We thus use instrumental variables and dynamic panel analysis as well. Our major findings are as follows: (1) the panel analysis shows that owners‟ concentration, FII shareholding and discrepancy relate positively to firm value. The positive discrepancy shows that families in India employ divergent control structures in generally valuable firms. Only extremely large discrepancy in FBG firms reduces value (2) period to period variation in RPTs related negatively to firm value (3) the random effects and fixed effects analysis shows that family business groups are positively related to firm value whereas the family activity, founder presence strongly negatively but heir presence weakly negatively related to firm value (4) We show that non-promoter ownership structure can be a major source of expropriation opportunity as expropriation structure, a function of free-riders and FII‟s share, is strongly negative across samples.
Essay 3: Ownership, Private Benefits, Acquisition Behaviour and Performance
In this essay we investigate how M&A performance and behavior is related to ownership, family particularities, group structure and private benefits. We analyze activity in terms of deal size and deal sizeability (deal value normalized by market value) and CAR derived from market model. Our major findings are: (1) Family affiliation, family activity, founder presence, and group affiliation are agnostic towards domestic as well as cross-border acquisition activity. However, the domestic acquisitions by the family are well received by the market in terms of abnormal performance (2) Ownership concentration is strongly negatively related to cross-border acquisition activity but do not matter in domestic deals. Ownership concentration is negatively related to performance in the cross-border deals as well. Only those firms holding below 25% ownership manage to elicit positive market response (3) RPTs are negatively related to cross-border activity but do not matter in the domestic case. In terms of performance also the RPTs are negatively related in cross-border deals but do not matter in the domestic deals (4) Smaller sized lesser valued, more operationally inefficient acquirers make larger sized deals. Cross-border deals by only highly valued firms elicit positive response (5) FII shareholding serves as barrier in large sized cross-border as well as domestic deals. Large FII shareholding is also related to lower performance in the cross-border deals- which may be related to FIIs exit. | en_US |
