Agency Theory and Firm Value in India

This paper examines empirically the effects of ownership structure on the firm performance for a panel of Indian corporate firms, from an 'agency perspective'. We examine the effect of interactions between corporate, foreign, institutional, and managerial ownership on firm performance. Using panel data framework, we show that a large fraction of crosssectional variation, in firm performance, found in several studies, can be explained by unobserved firm heterogeneity. We provide some evidence that the shareholding by institutional investors and managers affect firm performance non-linearly, after controlling for observed firm characteristics and unobserved firm heterogeneity. We find no evidence in favor of endogeneity of shareholding pattern