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Promoters' shareholding decreasing in non-family firms, rising in family firms: Study

The study further noted that non-promoter institutional shareholding is lower in family firms as against non-family firms and it has decreased further between 2007 to 2017.


PTI 07 Aug 2018, 10:39 AM India

Promoters' stake in non-family run firms is on the decline, while in case of family firms it is on an uptrend requiring a close vigil on their governance practices, says a study.

According to the study by Indian School of Business (ISB), promoters of family firms have increased their stake in their companies over the last decade, while State-owned Enterprises (SOEs), Other Business Group Firms (OBGFs) and Standalone Non-family Firms (NFs) have witnessed a decline in promoter shareholding.

The study by ISB's Thomas Schmidheiny Centre for Family Enterprise analyzed the trends in equity ownership by various classes of shareholders for 4,615 firms listed on the NSE and the BSE, across different ownership categories, from 2001-2017.

The research was conducted by Nupur Pavan Bang, Kavil Ramachandran and Anierudh Vishwanathan of ISB, and Sougata Ray of IIM Calcutta.

"The ownership pattern of listed businesses in India is fairly concentrated, especially in the case of family firms, SOEs and MNCs. While this has significant positive effects, there is also a need to keep a close vigil on their governance practices," said Ramachandran.

According to Bang, "it seems to imply that the engine of growth of Indian businesses will not be dependent on overseas or other promoter categories. Instead, promoters of family firms will continue to play a major role".

As per the study, in family business group firms (FBGFs), the preferred mode to hold shares is through holding companies, while in standalone family firms (SFFs) the family members prefer to hold shares directly as individuals or Hindu Undivided Family (HUF).

The study further noted that non-promoter institutional shareholding is lower in family firms as against non-family firms and it has decreased further between 2007 to 2017.

"Institutional investors have a strong preference for firms with good governance. Thus, we see higher institutional shareholding in non-family firms and Other business group firms," the report said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


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