Corporate Governance in India

This study describes the Indian corporate governance system and examines how the system has both supported and held back India's ascent to the top ranks of the world's economies. While on paper the country's legal system provides some of the best investor protection in the world, enforcement is a major problem with slow, over-burdened courts and significant corruption. Ownership remains concentrated and family business groups continue to be the dominant business model. There is significant pyramiding and tunneling among Indian business groups and, notwithstanding copious reporting requirements, evidence of earnings management. However, corporate governance in India does not compare unfavorably with any of the other major emerging economies: Brazil, China and Russia. India ranks high on the ease of getting credit, and has a well-functioning banking sector with one of the lowest proportions of nonperforming assets. The two main Stock Exchanges have among the highest number of trades in the world, and the relatively young Securities and Exchanges Board of India has a rigorous regulatory regime to ensure fairness, transparency and good practice. Most importantly, the corporate governance landscape in the country has been changing fast over the past decade, particularly with the enactment of Sarbanes-Oxley type measures and legal changes to improve the enforceability of creditor's rights. If this trend is maintained, India should have the quality of corporate governance necessary to sustain its impressive current growth rates.