Analysis of ownership pattern among BSE 500 firms and its impact.

Abstract

In this study, we gather the ownership and control data for BSE 500 firms and analyze its impact on dividend payout ratios and valuation measures. From the ownership data, we derive that Indian listed firms have concentrated ownership with 50% of BSE 500 firms having ownership of 50% (or)above of those firms. Also, we find that 95% of these firms are promoter led firms. When we took this ownership data and analyzed its relationship with dividend pay out ratios, we found that firms having high ownership concentration have higher dividend pay out ratios in general. Similarly, we found that when another large shareholder is present in the firm, the dividend payout ratio increases. We also found that foreign group led firms have higher dividend payout ratios compared to Indian group led firms. When we analyzed this ownership and control data with valuation ratios, we derived that valuation of firms increase with higher ownership values. But this valuation measure decreases when there is divergence between cash flow and control flow rights of the largest shareholding group. These results hold importance for corporate governance initiatives in India in general and inframing rules and regulations for protection of minority shareholders.