Corporate Governance and Foreign Ownership

Foreign Investment is the source of scare capital, technology up gradation, management expertise, employment generation and new product market in every economy. For more than two decades, it has played an important role in India to achieve a certain degree of financial stability, growth and development in almost all sectors of the economy. Since 1991 there has beena drastic increase in Foreign Investment inflow in the country. Good governance practice firms are preferred by investors as it reduces their information acquisition and monitoring cost. Since, 2000, a number of legal and regulatory reforms have been initiated by the Indian government to transform corporate governance framework and to improve the level of responsibility and accountability of insiders, so as to safeguard the interests of investors, especially minority shareholders and stakeholders, adoption of independent board by companies and transparency. In particular, the SEBI has introduced a corporate governance clause in the Listing Agreement (Clause 49) SEBI guidelines to address many issues in corporate governance.