The impact of ownership structure and corporate governance on energy intensity: evidence from Indian business groups

Nemiraja Jadiyappa, Emily Hickman and Namrata Saikia

Pacific Accounting Review, 2022, vol. 34, issue 4, 634-657

Abstract: Purpose - Energy efficiency is critical for global sustainability (International Energy Agency, 2019). The purpose of this paper is to examine how agency conflicts arising from pyramidal ownership structures impact the energy intensity (EI) of group-affiliated Indian firms. Group-affiliated firms face unique governance challenges. For instance, parent owners (promoters) may transfer profits from one group-affiliated firm to another firm in which they have greater ownership. The authors hypothesize that such governance issues will lead to underinvestment in energy-saving projects among group firms in which promoters have a low ownership stake, resulting in their greater EI. Design/methodology/approach - The authors measure EI as the ratio of total energy expense to total sales revenue (EI) and as the industry-adjusted version of this ratio. Group-affiliated Indian firms are divided into high- and low-stake firms based on the sample’s median promoter ownership. Findings - Results support the authors’ prediction: group firms in which promoters have low ownership are more energy intensive, consistent with these firms being exposed to greater governance challenges and agency conflicts that result in operating inefficiencies and/or underinvestment in energy-saving projects. Practical implications - Given energy efficiency will be key in addressing climate change, this study could raise awareness among activists, motivate regulators to consider agency problems among group-affiliated firms in emerging markets and may underscore the importance of environmental-related corporate disclosures. Originality/value - To the best of the authors’ knowledge, this study is the first to identify the significant impact that firm ownership structure and associated governance challenges have on corporate EI.

Keywords: Energy intensity/efficiency; Business groups; Ownership structure; Agency costs; Corporate governance; Emerging markets; Energy intensity (energy efficiency) (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:parpps:par-05-2021-0078

DOI: 10.1108/PAR-05-2021-0078

Access Statistics for this article

Pacific Accounting Review is currently edited by Professor Tom Scott, Dr Pei-Chi Kelly Hsiao, Associate Professor Chelsea Liu, Associate Professor Sophia Su, Associate Professor Thu Phuong Truong and Dr Lily Chen

More articles in Pacific Accounting Review from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().