Ownership concentration is a significant internal governance mechanism in which owners can control and influence the management of the firm to protect their interests. This research focuses on the relationship between ownership concentration and corporate governance and disclosure practices of firms. Accordingly, this study identifies and tests the empirical evidence for such relationship for sample firms listed in Bombay Stock Exchange (BSE) and selected from nine different sectors of the S&P BSE sectoral indices. Indian firms are predominantly of family origin and promoter controlled. This ownership effect provides promoters enough control over the management of the firm. The ownership concentration provides two offsetting effects: substitution effect and expropriation effect. From this perspective, the research explains the principal-agent agency theory as well as principal-principal theory. This research studies ownership concentration in terms of promoters’ holding and finds that promoters’ holding have a negative but insignificant correlation with corporate governance and disclosure practices of firms. As shareholding patterns in India show a high level of promoters’ concentration, it is interesting to see whether external efforts at improving corporate governance would succeed as it happened in economies of dispersed ownership.

Corporate governance structures and systems vary greatly across countries. The corporate governance system across the world can be classified, based on the degree of ownership and control and the identity of controlling shareholders, into two broad categories—the outsider systems (notably the US and the UK) characterized by widely dispersed ownership and the insider systems (notably continental Europe and Japan) characterized by concentrated ownership or control (Maher and Andersson, 1999). Firm ownership is an increasingly influential form of corporate governance (Connelly et al., 2010).

Corporate governance and disclosure practices of firms are influenced by various variables such as board size, board independence, board committees, cross-listing of firms, CEO duality, auditor selection, nature of industry (manufacturing versus service firms, traditional versus knowledge-intensive firms, and tangible assets versus intangible assets dominated firms), and firm characteristics (size, age, leverage, origin and types of firms, viz., public sector, private sector and foreign firms). This study aims to contribute to the understanding of corporate governance and disclosure issue by analyzing the specific governance variable, viz., ownership concentration of the firm.

Corporate Governance Journal, Ownership Concentration, Corporate Governance, Disclosure Practices, A Study of Firms, Bombay Stock Exchange (BSE), Agency Theory, Ownership Concentration.