SHAREHOLDERS ACTIVISM AS A CORRECTIVE MECHANISM: A CASE STUDY OF INDIAN MUTUAL FUNDS AMC

Ruchi Kansil and Archana Singh
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Ruchi Kansil: Delhi School of Management, Delhi Technological University, New Delhi-110042, India.
Archana Singh: Delhi School of Management, Delhi Technological University, New Delhi-110042, India.

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Abstract: The present paper discusses shareholder activism for mutual fund Asset Management Companies (AMC) in India suggesting it to be a corrective mechanism for ensuring good corporate practices and enhancing shareholder value. The analysis is based on the mandatory disclosure, imposed by Securities and Exchange Board of India (SEBI) of votes exercised by institutional investor's, that is, Mutual Fund Asset Management Companies (AMC) in the various shareholder meetings of the portfolio companies in which they have invested. The purpose of this paper is to explore the shareholder activism, in terms of, votes exercised for, against or abstain – by AMCs'. A content analysis method is followed and it is found that for the foreign mutual funds the participation ratio varies from 72% to 91% with highest participation ratio in Annual General Meeting. On the contrary, the participation ratio for Indian mutual funds varies from 40% to 92%. SEBI has undertaken various extensive efforts to increase shareholder activism in India, yet the number of instances of abstain from voting is as large as 44% for Indian mutual funds as against 14% for foreign mutual funds. There is no significant difference found in average participation ratio of AMC across various types of meetings and average participation ratio of Indian AMC and foreign AMC. We conclude that the sizeable investments of AMC's can be a significant force in maintaining good corporate governance as they have both the expertise and resources to act as activists and expect more and more participation in times to come.

Date: 2016-11-14
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Published in Journal of Global Economics, Management and Business Research, 2016, 7 (4), pp.306-312

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