Does informal governance matter to institutional investors? Evidence from social capital

Huang, Kershen; Shang, Chenguang

doi:10.1111/fire.12373

Cited by 2 publications

(1 citation statement)

References 84 publications

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“…Hence, it is likely that SA may lead to an improvement in the financial performance of the business and the wealth of the shareholders. Empirical evidence suggests that post-SA, there has been a significant improvement in the performance of the firm (Del Guercio and Hawkins, 1999;Gillan and Starks, 2000;Hartzell and Starks, 2003;Karpoff, 2001;Gillan and Starks, 2007), measured through operating performance (Del Guercio et al, 2008); market reactions and shareholder value (Gillan and Starks, 2007;Huson, 1997;Opler and Sokobin, 1998); and value of the firm . Further, a lack of good governance is perceived to be against the interests of minority shareholders (Shleifer and Vishny, 1997), and hence any evidence of poor governance practices may act as an antecedent to SA.…”

Section: Unfolding Of Shareholder Activism In Indiamentioning

confidence: 99%

The unfolding of shareholder activism in India: an exploratory study

Islam

2023

IJLMA

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Purpose The purpose of this study is to provide a holistic view of the emergence of shareholder activism (SA) in India. However, specifically, this study aims at fulfilling the research gap by discussing the policy and legal advancement in the area of SA and investigating the chronological evolution of SA, manifestations of SA, motives of SA, outcome of SAs and impact of SA on the financial performance of the firm. Design/methodology/approach This study used a mixed methodology (both qualitative and quantitative) to draw inferences, including content analysis, descriptive statistics, independent sample t-test and paired sample t-test. The data has been collected from the annual reports of the sample companies and the Prowess database. Return on assets and return on equity have been used as measures of financial performance while investigating the difference in financial performance between firms subjected to SA and firms not subjected to SA. Findings The findings of this study suggest that there has been significant growth in the occurrence of SA incidents in India in the past decade, with shareholders prominently manifesting by opposing the proposals at annual general meetings/extraordinary general meetings, mostly involving governance-related demands. The findings from the independent sample t-tests revealed that there has been a significant difference in the financial performance of the sample subjected to SA and firms not subjected to SA. Furthermore, the results of the paired sample t-test provide strong evidence of significant improvement in the financial performance of firms’ post-SA. Practical implications The findings of this study have implications for various stakeholders. The findings of this study suggest that SA has been relatively more successful in the Indian context and may encourage minority shareholders to follow active participation through shareholder proposals and votes rather than a passive strategy to trade and exit. For firms, it can provide valuable inferences about the emergence of SA and how it has a positive impact on the financial performance of the firm, which can lead to a change in the perception of investors and promoters who perceive SA as a threat (Gillan and Starks 2000; Hartzell and Starks, 2003). For policymakers, it can act as a tool to investigate whether the regulatory changes have been able to bring the intended transparency, accountability and enhanced shareholder participation. This will encourage policymakers to be more agile, as their efforts are bearing fruit. This will also act as a guide to formulating future policies and regulations. Originality/value This study is an effort to provide a holistic view of SA scenarios in a developing economy setting like India, where SA is a very recent phenomenon. Although there are studies in the area of SA, there is a dearth of studies that have investigated the various dimensions of SA in the Indian context in a very systematic and extensive manner, investigating all the different dimensions of SA. Furthermore, this study also intends to investigate the impact of SA, which is normally perceived as a threat to financial performance and provide valuable contrasting evidence.

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Section: Unfolding Of Shareholder Activism In Indiamentioning

confidence: 99%

The unfolding of shareholder activism in India: an exploratory study

Islam

2023

IJLMA

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Social capital and supply chain relationships

Kang,

Nemani,

Raman

2024

The Financial Review

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We examine the role of social capital in influencing decisions pertaining to buyer–supplier relationships. We report that firms make larger relationship‐specific investments when their supply chain partners are headquartered in states with high social capital. This result is more pronounced when supply chain partners have incentives to engage in opportunistic behavior. Furthermore, the duration of supply chain relationships is longer when the firm and its supply chain partner are both headquartered in high social capital states, and when the partner invests in relationship‐specific assets. Collectively, the evidence suggests that social norms reflecting trustworthiness facilitate investment and stability along supply chains.

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Does informal governance matter to institutional investors? Evidence from social capital

Cited by 2 publications

References 84 publications

The unfolding of shareholder activism in India: an exploratory study

The unfolding of shareholder activism in India: an exploratory study

Social capital and supply chain relationships

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