Ownership structure, group affiliation and board composition: evidence from India

Abstract Scholars have advanced multiple theoretical perspectives to analyze different roles that boards fulfil. Prominent amongst these are agency theory, which emphasizes monitoring and control, resource dependence theory, which highlights boards’ role in securing external resources and legitimacy, and an institutional perspective that identifies contingencies that elevate or suppress these roles. Based on these frameworks, I examine the antecedents of board structure for Indian firms. Empirical findings based on a longitudinal sample of 2,689 publicly listed Indian firms suggest that family ownership is positively correlated with both the presence of independent directors and CEO duality. Firms affiliated with a business group have more independent board members and are less likely to have CEO duality. Importantly, group affiliation interacts with family ownership such that high family ownership in group-affiliated firms leads to a reduced incidence of independent board members and an increased incidence of CEO duality, revealing a mechanism through which family owners leverage group structures to entrench control across affiliated firms, a manifestation of the principal–principal agency problem distinctive to emerging markets.