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Financial Performance in Indian State-Owned Enterprises Following Corporate Governance Reforms

Mechanisms, Roles and Consequences of Governance: Emerging Issues

ISBN: 978-1-78350-705-4, eISBN: 978-1-78350-706-1

Publication date: 19 July 2014


Research question

This paper empirically examines the impact of corporate governance reforms on the financial performance of Indian state-owned enterprises (SOEs) for the period 2003–2011.

Research findings/insights

The findings indicate that the various corporate governance reforms collectively exhibited a statistically significant positive impact on performance when a difference in difference estimation process is used. However, the performance of SOEs is less than that of publicly listed companies, which is consistent with prior research. When the SOEs are compared with a matched pairing of publicly listed companies of similar size and same industry, their performance was comparable and in many instances superior. This is indicative of the regulatory constraints on competitors and preferential access to resources and markets given to the SOEs. As SOEs move towards a more mixed ownership model with more of them listed on the stock exchange and greater public ownership of shares the corporate governance issues will increase in importance.

Theoretical/academic implications

The controlled sell down of shares in SOEs presents a need for continuing governance reforms and ongoing research to track progress.

Practitioner/policy implications

The most striking observation from the study is that changes that were introduced as a corporate governance reform, such greater professionalism in boards, did not gain traction and enhance performance, rather the process of director selection and the concentrated bureaucratic and political interference stymied what was asserted to be conceptually sound reforms.




We are thankful to Alessandro Hinna and Fabio Monteduro (track chairs) for their suggestions in IRSPM-2013 which are incorporated in the updated version of the paper.


Locke, S. and Duppati, G. (2014), "Financial Performance in Indian State-Owned Enterprises Following Corporate Governance Reforms", Mechanisms, Roles and Consequences of Governance: Emerging Issues (Studies in Public and Non-Profit Governance, Vol. 2), Emerald Group Publishing Limited, Bingley, pp. 59-88.



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