TY  - JOUR
AU  - Khanna,Tarun
AU  - Palepu,Krishna
TI  - Emerging Market Business Groups, Foreign Investors, and Corporate Governance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6955
PY  - 1999
Y2  - February 1999
UR  - http://www.nber.org/papers/w6955
L1  - http://www.nber.org/papers/w6955.pdf
N1  - Author contact info:
Tarun Khanna
Harvard Business School
Morgan Hall 221
Soldiers Field
Boston, MA 02163
Tel: 617/495-6038
E-Mail: tkhanna@hbs.edu

Krishna Palepu
Harvard Business School
Morgan Hall 385
Soldiers Field
Boston, MA 02163
http://krishnapalepu.org/
Tel: 617/495-6759
E-Mail: kpalepu@hbs.edu
AB  - We examine the interaction between three kinds of concentrated owners commonly found in an emerging market: family-run business groups, domestic financial institutions, and foreign financial institutions. Using data from India in the early 1990s, we find evidence that domestic international investors are poor monitors, and that foreign institutional investors are good monitors.  Whereas affiliates of those groups that attract foreign institutional investment are no more difficult to monitor than are unaffiliated firms, we find that group affiliation reduces the likelihood of foreign institutional investment.  More transparent groups (where greater transparency is proxied for by a lower incidence of intra-group financial transactions) are more likely to attract such investment.  We conclude that groups are difficult to monitor, and that foreign institutional investors serve a valuable monitoring function as emerging markets integrate with the global economy.
ER  -