Business Group Affiliation, Firm Governance and Firm Performance : Evidence from China and India

Using an integration of agency theory with an institutional perspective, we investigate how business group affiliation, with-in firm governance and external governance environment affect firm performance in emerging economies. Using archival data on top 500 Indian and Chinese firms from multiple data sources for 2007, we found that group affiliated firms performed worse than unaffiliated firms, and the negative relationship was stronger in the case of Indian firms than Chinese firms. We also found that ownership concentration had a positive effect on firm performance, while board independence had a negative effect on firm performance. Further, we found that group affiliation - firm performance relationship in a given country context was moderated by ownership concentration