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Foreign institutional investment, business groups and firm performance: Evidence from India

Jhuma Mukhopadhyay and Indrani Chakraborty

Research in International Business and Finance, 2017, vol. 39, issue PA, 454-465

Abstract: The article tries to examine the relationship between equity ownership held by the foreign institutional investors and firm performance both in a static and a dynamic framework. We also examine how the relationship differs between group-affiliated and stand-alone firms. By employing the 2SLS panel data estimation technique on 137 BSE listed Indian firms, the study finds that foreign institutional investment has a positive influence on the firm performance as measured through Tobin’s Q and ROA.Application of linear dynamic panel data estimation in a dynamic framework also yields similar results.The latter method also shows that FII has a positive significant effect on Tobin’s Q in group-affiliated firms. The results are analysed from the perspective of a multi-theoretic approach consisting of agency theory, information asymmetry theory, institutional theory and resource dependency theory.

Keywords: Foreign institutional investment; Firm performance; Panel data; Multi-theoretic approach; India (search for similar items in EconPapers)
JEL-codes: C23 C33 C36 G30 G32 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:riibaf:v:39:y:2017:i:pa:p:454-465