NIDHI SHARMA | Maharshi Dayanand University (original) (raw)

Papers by NIDHI SHARMA

1. The Problem The study in context to the " Role of Institutional Investors in Corporate Governa... more 1. The Problem The study in context to the " Role of Institutional Investors in Corporate Governance in India " has been done to evaluate the active role institutional investors and its elements play in corporate governance activities of companies and if they have any effect over financial feat of relevant companies. In this study, we principally evaluate two questions concerning to the debate: i) Do institutional investors evaluate corporate managers? ii) Are institutional investors fleeting and myopic that grants insufficient incentives to regulate the firm? We examine these questions by evaluating the magnitude to which manager's influence accounting numbers and the attendant market response to such responsibility. Institutional investors, who now own a noteworthy portion of equity in Indian banks, are frequently explained as transient and narrow-minded owners with no incentives to engage themselves in governance. We investigate the strength of this declaration by evaluating whether institutional owners restrain managerial diplomacy by limiting earnings manipulation. Particularly, we examine the relation linking institutional ownership and optional accounting behaviour, as calculated by discretionary accruals. Our conclusions are coherent with institutional evaluating and contradictory with institutional investors motivating narrow-minded management behaviour. 2. The Concept of the Study Institutional investors can be explained as economic entities with large amount of capital to spend; they involve brokers, mutual funds, pension funds, insurance companies, investment banks and endowment funds (Salehi et al., 2011). Their potential impact as huge shareholders was trailed back to 1930 in the division of owners from management of business to be in control of directors when it was primarily initiated by Berle and Means in 1932. This division of ownership was after the agency problem, when managers (agents) might search for their own interest instead of on behalf of the pursuit of shareholders. The conventional view that the dissemination of a firm's share possession has no impact on the value of the firm has been confronted by a vision that can be trailed back to Berle and Means (1932) and Jensen and Meckling (1976). The efficient evaluation theory opposes that the bigger the shareholding of the institutional shareholder, the more effective the evaluation exerted by that shareholder and the more the possibility of dissident success. Institutional investors jointly hold a significant portion of equity capital in the India. As a result, the role of such financers in corporate governance has been the topic of popular discussion in recent years. Former research (e.g., Schleifer and Vishny, 1986; Watts, 1988) and anecdotal proof recommend that institutions can possibly play an active role in evaluating and disciplining managerial judgment. Nevertheless, critics (e.g., Bhide, 1993) claim that institutional participation in corporate governance is bound to be reactive either because of their fragmented or evanescent ownership. Additionally, institutions are characterized as narrow-minded investors who emphasize excessively on current earnings instead of long-term earnings in shaping stock prices (Jacobs, 1991; Porter, 1992). Such a short-term emphasis is liable to deter institutional investors from incurring costs of evaluating managers and leading the firm. In this study, we present empirical facts on the contentious role of institutions in corporate governance by examining i)the relation involving institutional ownership and managers' open behaviour in manipulating accounting incomes, and ii) the pricing inferences of such managerial judgment. The participation of institutions in corporate governance has a straight effect on the agency expenditure ensuing from the disconnection of ownership and control. Agency costs occur from discrepancy of welfare between managers and shareholders Abstract: Thus institutional investors are the organisations which pool large sum of money and invest those sum in different kind of securities, real assets, mutual funds and others. These investors act as highly specialised investors on behalf of others. Typical investor include banks, indemnity companies, retirement or pension stock s, hedge finances, investiture funds advisors and mutual funds. Their role in the economy is to routine as highly specialized investors on behalf of others. The role that the institutional investors can play in the corporate governance system of a company is a controversial question. In this paper you will study the view points of many researchers here. Few believe that the institutional investors must interfere in the corporate governance system of a company; others believe that these investors have other investment objectives to follow. Those who believe that institutional investors need not play a role in the corporate governance system of a company, argue that the investment objectives and the compensation system in the institutional investing companies often discourage their active participation in the corporate governance system of the companies.