Promoter Ownership and Leverage: An Empirical Evidence of Agency Problem in Select FMCG Companies

The study examines the association between promoter ownership and leverage of Fast Moving Consumer Goods (FMCG) companies listed at BSE in the ‘A’ category. The FMCG Industry is a vital sector for the Indian economy. Leverage decision is a critical financial decision. In the year, 2020 the revenue of the FMCG market was USD 110 billion. The study tries to investigate the impact of promoter shareholding on the leverage decision of Indian FMCG companies. The study is conducted on a sample of 46 companies and the study period ranges from 2017-2022 for 5 years. The study conducted A panel data model is opted for data analysis. The study also conducted a diagnostic test to further check the reliability of the data. The study indicated a significant positive association between ownership structure and leverage. Due to the existence of agency problems, the leverage decisions deviate from neoclassical models. The study’s finding adds to the extant literature on promoter ownership. The positive relationship indicated the existence of an agency problem. Firm executives should try to reduce Agency problems to enhance firm performance.