Shareholders’ Activism in India: Understanding characteristics of companies targeted by activist shareholders using discriminant analysis

Shingade, Sudam; Rastogi, Shailesh; Panse, Chetan

doi:10.1109/temsconeurope54743.2022.9802046

Cited by 3 publications

(8 citation statements)

References 37 publications

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“…Even though SA is a relatively new phenomenon in India, there is evidence that its prevalence is rising. Investigations into the impact of SA on the financial performance of the firm suggest that there is no significant difference between the financial performance of firms subjected to SA and firms not subjected to SA in the year of incidence, which is in concurrence with the previous studies (Shingade et al , 2022a, 2022b). However, in the succeeding years ( t +1 and t +2 ) a significant difference in financial performance was found to exist.…”

Section: Introductionsupporting

confidence: 88%

“…Existing research in the area of SA in India suggests that SA has gained momentum over the past decade (Shingade et al, 2022a(Shingade et al, , 2022bIslam et al, 2020;Islam, 2020), and there has been a significant increase in the number of proposals rejected by shareholders since the implementation of various regulatory and policy reforms (Shingade et al, 2022a(Shingade et al, , 2022b Investigations into the impact of SA on the firm-level variables in India revealed a significant increase in the performance of the firm post-SA (Islam, 2020). However, a shred of contrasting evidence has also been proposed, suggesting that there is no significant impact of SA on performance measures, including valuation, profitability, margins and return results (Shingade et al, 2022a(Shingade et al, , 2022b. Further investigations into the impact of SA on corporate governance quality revealed a significant positive impact of SA on improving corporate governance quality (Bhandari and Arora, 2016).…”

Section: Unfolding Of Shareholder Activism In Indiamentioning

confidence: 99%

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The unfolding of shareholder activism in India: an exploratory study

Islam

2023

IJLMA

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Purpose The purpose of this study is to provide a holistic view of the emergence of shareholder activism (SA) in India. However, specifically, this study aims at fulfilling the research gap by discussing the policy and legal advancement in the area of SA and investigating the chronological evolution of SA, manifestations of SA, motives of SA, outcome of SAs and impact of SA on the financial performance of the firm. Design/methodology/approach This study used a mixed methodology (both qualitative and quantitative) to draw inferences, including content analysis, descriptive statistics, independent sample t-test and paired sample t-test. The data has been collected from the annual reports of the sample companies and the Prowess database. Return on assets and return on equity have been used as measures of financial performance while investigating the difference in financial performance between firms subjected to SA and firms not subjected to SA. Findings The findings of this study suggest that there has been significant growth in the occurrence of SA incidents in India in the past decade, with shareholders prominently manifesting by opposing the proposals at annual general meetings/extraordinary general meetings, mostly involving governance-related demands. The findings from the independent sample t-tests revealed that there has been a significant difference in the financial performance of the sample subjected to SA and firms not subjected to SA. Furthermore, the results of the paired sample t-test provide strong evidence of significant improvement in the financial performance of firms’ post-SA. Practical implications The findings of this study have implications for various stakeholders. The findings of this study suggest that SA has been relatively more successful in the Indian context and may encourage minority shareholders to follow active participation through shareholder proposals and votes rather than a passive strategy to trade and exit. For firms, it can provide valuable inferences about the emergence of SA and how it has a positive impact on the financial performance of the firm, which can lead to a change in the perception of investors and promoters who perceive SA as a threat (Gillan and Starks 2000; Hartzell and Starks, 2003). For policymakers, it can act as a tool to investigate whether the regulatory changes have been able to bring the intended transparency, accountability and enhanced shareholder participation. This will encourage policymakers to be more agile, as their efforts are bearing fruit. This will also act as a guide to formulating future policies and regulations. Originality/value This study is an effort to provide a holistic view of SA scenarios in a developing economy setting like India, where SA is a very recent phenomenon. Although there are studies in the area of SA, there is a dearth of studies that have investigated the various dimensions of SA in the Indian context in a very systematic and extensive manner, investigating all the different dimensions of SA. Furthermore, this study also intends to investigate the impact of SA, which is normally perceived as a threat to financial performance and provide valuable contrasting evidence.

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Section: Introductionsupporting

confidence: 88%

Section: Unfolding Of Shareholder Activism In Indiamentioning

confidence: 99%

The unfolding of shareholder activism in India: an exploratory study

Islam

2023

IJLMA

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“…Broadly, as discussed earlier, SA can be categorized into governance-related (including both financial and non-financial), social, environmental, and political issues. Among all the four categories mentioned above, the various issues raised can also be clubbed under the following four groups (Shingade & Rastogi, 2020): (a) board of director related matters, (b) executive/senior management related matters including their compensation, (c) financial performance and valuation-related issues, and (d) idle cash and capital structure-related issues. However, one more issue that is quite often discussed implicitly is the SA targeted for takeover (or management control).…”

Section: Theoretical Framework Literature Review and Hypotheses Formu...mentioning

confidence: 99%

“…Earlier in India, separation of ownership with management was missing, attempts to hostile takeover were less, and institutional investors were either not united or not active as shareholders (Sridhar, 2016). SA in India is still in its early stages (Shingade & Rastogi, 2019; Shingade et al, 2020). A lot has been changed gradually regarding SA due to (a) changes in the regulation and legislation concerning SHA, (b) succession issues become rampant, balance sheets are over-levered, and (c) international investors become part of the shareholders of the Indian firms (Sarkar & Sarkar, 2000; Varottil, 2012).…”

Section: Theoretical Framework Literature Review and Hypotheses Formu...mentioning

confidence: 99%

“…The extant literature on SA is skewed toward developed economies (Sarkar & Sarkar, 2000). Evidence shows that SA is in its infancy in emerging economies like India (Shingade et al, 2020). In a multi-country study on SA, Judge et al (2010) show that the relevance and impact of SA differ as to the system of the law and income disparity changes.…”

Section: Introductionmentioning

confidence: 99%

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Impact of Shareholders’ Activism on the Performance of Banks in India: A Panel Data Application

Rastogi

Singh

Kanoujiya

2023

Business Perspectives and Research

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There is a widespread uncertainty regarding the usefulness of shareholder activism (SA) as a part of corporate governance for firms and banks. SA has wide acceptance across the board among all the stakeholders’ participation. Since banks are the backbone of any economy, any endeavor (support to SA) creating difficulty may boomerang. Such actions do more harm than good; therefore, it is imperative to determine whether SA is beneficial to the banks or not. In this study, the SA index is built for Indian banks. The data relating to bank performance and valuation is gathered for 2016–2019. Panel data econometrics is applied to determine the impact of SA on banks performance. Results reveal that SA impacts bank performance. Furthermore, transparency and disclosure significantly moderates the association of SA with the performance. However, SA is not impacting bank valuation. It is a unique study of its kind to provide insights on SA for the banking sector.

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Shareholder Activism and Its Impact on Profitability, Return, and Valuation of the Firms in India

Shingade

Rastogi

Bhimavarapu

et al. 2022

JRFM

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The paper’s prime objective is to understand the impact of Shareholder activism on firm performance. This study is conducted in a unique setup where traditional activist investors such as pension funds and hedge funds are not present. However, the activism cases are increasing yearly in an emerging economy like India. We have created a comprehensive shareholder activism index (sha index) using multiple activisms and corporate governance factors. To measure firm performance, we have used valuation (Tobin’s Q and Market capitalization), profitability (operating profit margin and net profit margin), and return ratios (Return on capital and return on equity). Panel data analysis (PDA) is employed for the current study as it overcomes the shortcomings of the time series analysis and cross-sectional studies. The sample comprises 37 listed firms’ data for FY2017 to FY2020. Chosen firms have experienced activism instances at least once during the 2017–2020 period. As per our analysis, shareholder activism has a significant negative impact on valuation measured in market capitalization and profitability estimated by operating profit margin. Activism primarily impacts the other four parameters negatively, but it is insignificant. India is in the nascent stage of activism, partly explaining the insignificance of the effects of shareholder activism on firm performance. Also, activist investors are targeting companies. These attacks are not fructifying desired outcomes as promoters own over 50% stake in the listed companies. The latest data for FY2021 has not been considered for the study as covid-19 impacted the businesses during the financial year. Also, we cannot capture activism instances that are not reported in regulatory filings. Unlike past research in this area, we have used a comprehensive activism index as a proxy of activism and have employed PDA instead of event studies to assess the impact on firm performance. Also, this is the first such empirical study conducted in an emerging economy setup where neither large hedge nor pension funds are present.

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Shareholders’ Activism in India: Understanding characteristics of companies targeted by activist shareholders using discriminant analysis

Cited by 3 publications

References 37 publications

The unfolding of shareholder activism in India: an exploratory study

The unfolding of shareholder activism in India: an exploratory study

Impact of Shareholders’ Activism on the Performance of Banks in India: A Panel Data Application

Shareholder Activism and Its Impact on Profitability, Return, and Valuation of the Firms in India

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