Does founder ownership affect foreign investments? Evidence from India

Yogesh Chauhan and Satish Kumar

Emerging Markets Review, 2017, vol. 32, issue C, 116-129

Abstract: We study the effect of founder ownership on foreign investments for Indian firms. We show that foreign investors underinvest in firms with higher level of founder ownership, since these firms are more vulnerable to information problems and expropriation risk. This effect is particularly stronger when founder ownership exceeds a threshold beyond which founders hold effective control on firms. We exhibit that information problems are the main cause of the relation between foreign investments and founder ownership. This is because the relationship is more pronounced in case of business group firms and firms that are engaged in more earnings management.

Keywords: Foreign investments; Founder ownership; Earnings management; Emerging market; India (search for similar items in EconPapers)
JEL-codes: G14 G32 G34 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:32:y:2017:i:c:p:116-129

DOI: 10.1016/j.ememar.2017.06.001

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