Impact of Institutional Set-Up on the Responsiveness to Change in a Firm’s Governance Structure: A Comparative Study of Public and Private Sector Enterprises in India

Monika Singla () and Shveta Singh
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Monika Singla: Indian Institute of Technology Delhi
Shveta Singh: Indian Institute of Technology Delhi

Global Journal of Flexible Systems Management, 2018, vol. 19, issue 2, No 5, 159-172

Abstract: Abstract In the recent past, flexibility as a concept has gained significant importance in all the perspectives of an organization (strategic, marketing, technical, operational, financial and so on). It has been cited as a strategic driver to enhance the value of the firm. Flexibility refers to the ability of the firm to change itself in response to various stimuli (internal/external). Since public and private sector organizations work under different institutional set-ups, this paper aims to analyse the responsiveness of public and private sector companies to adapt with the external regulatory requirements to strengthen their corporate governance structure. The empirical findings report that the responsiveness of the public sector firms is significantly lower than the private sector firms to incorporate the regulatory requirements related to corporate governance. Further, the findings reveal that the unique institutional set-ups of public sector firms (like diffusion of power, interference of government and lack of power vested in the board members) impede the ability of the public sector firms to transform its governance structure. The findings raise concerns for the policymakers to address various institutional issues and set the accountability to the appropriate authorities to tackle various compliance issues. Considering the perspective of the public sector firms, the lack of flexibility of these firms owing to their institutional limitations deprives these firms to reap the benefits of good governance (higher firm value, efficiency and investor confidence).

Keywords: Clause 49; Corporate governance; Flexibility; India; Institutional theory; Public versus private sector; Responsiveness to change (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s40171-018-0185-9

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