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

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  • Mukhopadhyay, Jhuma
  • Chakraborty, Indrani

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.

Suggested Citation

  • Mukhopadhyay, Jhuma & Chakraborty, Indrani, 2017. "Foreign institutional investment, business groups and firm performance: Evidence from India," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 454-465.
    • Handle: RePEc:eee:riibaf:v:39:y:2017:i:pa:p:454-465
    DOI: 10.1016/j.ribaf.2016.09.015
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    More about this item

    Keywords

    Foreign institutional investment; Firm performance; Panel data; Multi-theoretic approach; India;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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