- Title
- The interactive effects of business group affiliation and family management on firm performance and risk taking: evidence from India
- Creator
- Khan, Md Mahbubul Haque
- Relation
- University of Newcastle Research Higher Degree Thesis
- Resource Type
- thesis
- Date
- 2020
- Description
- Research Doctorate - Doctor of Philosophy (PhD)
- Description
- The extant literature documents the impact of business group affiliation, family ownership, and family management on firm performance, separately. Few studies document the impact of these factors on corporate risk taking. However, no study has documented the interaction effects of family management and business group affiliation on either firm performance or risk taking. This thesis, by examining a large sample of Indian companies, provides evidence that family managers increase firm performance and reduce firm risk taking if they are employed in a group affiliated family firm. However, they do the opposite if they are hired in a non-group family firm. Chapter Two provides an outline of the overall corporate governance structure and institutional context in India. Despite economic liberalisation since the 1990s, India’s equity market remains dominated by business groups and family-run firms with business group affiliations. As of March 2014, the ten largest business groups in India accounted for 32 percent of the market capitalisation of India’s equity market, while another 562 business groups accounted for a further 35 percent of the market capitalisation (Basu & Sen, 2015). Chakrabarti, Megginson, and Yadav (2008) report that family-run business groups comprise approximately 60 percent of the largest 500 companies in India, with the founding promoters holding approximately 53 percent of the equity in these group-affiliated family firms. Therefore, the Indian equity market uniquely provides a laboratory to carry out research on business group affiliation and family ownership, especially to look at the interactive relationships of these factors. Chapter Three examines the impact of family ownership, family management, and business group affiliation, on firm performance. Theoretical and empirical evidence suggests that business group affiliation and family management may independently affect firm performance. However, this chapter extends the literature by examining the interactive effects of these factors on firm performance. This study examines whether business group affiliation improves the performance of family managed firms. Using panel data for more than 2500 publicly listed Indian firms between 2003 and 2016, it provides evidence that business group affiliation negatively affects firm performance, that family ownership positively affects firm performance, but that family management is detrimental to firm performance. However, business group affiliation mitigates the negative effect of family management on firm performance. Chapter Four examines the impact of family ownership, family management, and business group affiliation, on corporate risk taking. Existing literature shows that group affiliation and family ownership may affect risk taking either positively or negatively. Theoretical views also suggest that family management may be associated with higher or lower risk taking. Results from Chapter Four suggest that family managers in a family firm become entrenched and take higher risks than do the non-family managers. However, risk taking of family managers is reduced in a group affiliated family firm. One possible explanation for this finding is that, family managers become less inclined to take risks under group monitoring. They also become more protective of the socio-emotional wealth of the family in a group firm. This study confirms that higher family ownership is associated with lower corporate risk taking.
- Subject
- business group affiliation; family management; family ownership; firm performance; firm risk taking; gorporate governance; India
- Identifier
- http://hdl.handle.net/1959.13/1428330
- Identifier
- uon:38618
- Rights
- Copyright 2020 Md Mahbubul Haque Khan
- Language
- eng
- Full Text
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| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
| View Details Download | ATTACHMENT01 | Thesis | 1 MB | Adobe Acrobat PDF | View Details Download | ||
| View Details Download | ATTACHMENT02 | Abstract | 190 KB | Adobe Acrobat PDF | View Details Download |