Does Ownership Structure Impact Competitiveness of Firms in Their Product Markets? Evidence from India.

Existing literature shows that monitoring the effect of concentrated ownership has a positive impact on firm value. However, the economic channel of such a positive impact has not been examined. This study offers a possible economic channel and tests it empirically using a panel of Indian firms. The hypothesis of the paper is that concentrated ownership increases the competitiveness of the firms, through efficient monitoring of their activities, in their product markets, thus increasing the growth rate of firms. The results show that both institutional and promoter ownership have a positive impact on firm competitiveness. However, foreign concentration has an insignificant impact. Moreover, for business group-affiliated firms, only institutional concentration has a positive impact. The results remain robust for different specifications and endogeneity issue. [ABSTRACT FROM AUTHOR]