The Corporate Governance of Banks: A Concise Discussion of Concepts and Evidence
-- Ross Levine

This paper examines the corporate governance of banks. When banks efficiently mobilize and allocate funds, this lowers the cost of capital to firms, boosts capital formation, and stimulates productivity growth. Thus, weak governance of banks reverberates throughout the economy with negative ramifications for economic development. After reviewing the major governance concepts for corporations in general, this paper discusses two special attributes of banks that make them special in practice: Greater opaqueness than other industries and greater government regulation. These attributes weaken many traditional governance mechanisms. Next, the paper reviews emerging evidence on which government policies enhance the governance of banks and draws tentative policy lessons. In sum, existing work suggests that it is important to strengthen the ability and incentives of private investors to exert governance over banks rather than relying excessively on government regulators. These conclusions, however, are particularly tentative because considerably more research is needed on how legal, regulatory and supervisory policies influence the governance of banks.

© 2004 The World Bank Group (http://econ.worldbank.org). World Bank Policy Research Working Paper 3404, September 2004. Reprinted with permission.

The Ownership Saga at Reliance Industries Ltd., and the Corporate Governance Practices of the Company
-- Syeedun Nisa

Recently reliance industry Ltd., one of India's best private sector enterprises, was embroiled in controversies and troubles because of the ownership issue and the subsequent quarrels between the two brothersAnil and Mukesh Ambani. After the dispute between the two brothers arose, the issue of corporate governance came into the picture. This paper discusses about the reliance industry and the corporate governance practices that are followed by the company.

© 2005 IUP. All Rights Reserved.

Ownership Structure and Firm Performance: A Review of Literature
-- Malla Praveen Bhasa

This paper attempts to review literature on corporate governance on the ownership structure from a firm performance perspective. The dominant paradigm of corporate governance is based on the argument of Berle and Means (1932) that separation of ownership and control affects the reported level of income of firms, either positively or negatively. Subsequent studies have taken off from this concept of separation of ownership and control or in what is otherwise more famously known as `conflict of interests' theory. Seven major arguments that have emerged within the context of `conflict of interests' theory are explained in this paper. These arguments are basically considered to have emerged as an explanation to discuss the motivations that govern the managers and owners running the corporations. The uniqueness of the paper is in the way the literature is organized. As alluded earlier, corporate governance within the conflict of interests framework is subject to behavioral motivations of those who run the corporations. The profoundness of conflict of interests lies in where the locus of control iswith the managers, the owners, the institutional investors or with the markets. Hence, the literature has been classified under a few major headings to explain the importance of `locus of control' and its impacts on firm's performance. Finally, some concluding remarks are offered in the summary.

© 2005 IUP. All Rights Reserved.

Corporate Governance in India: Evolution and Challenges
-- Rajesh Chakrabarti

While recent high-profile corporate governance failures in developed countries have brought the subject to media attention, the issue has always been central to finance and economics. The issue is particularly important for developing countries since it is central to financial and economic development. Recent research has established that financial development is largely dependent on investor protection in a countrydejure and de facto. India, with the legacy of the British legal system, has one of the best corporate governance laws but poor implementation combined with socialistic policies of the pre-reform era which affected corporate governance. Concentrated ownership of shares, pyramiding and tunneling of funds among group companies mark the Indian corporate landscape. Boards of directors have frequently been silent spectators with the DFI nominee directors unable or unwilling to carry out their monitoring functions. Since liberalization, however, serious efforts have been directed at overhauling the system with the SEBI instituting clause 49 of the Listing Agreements dealing with corporate governance. Corporate governance of Indian banks is also undergoing a process of change with a move towards more market-based governance.

© 2005 Rajesh Chakrabarti. All Rights Reserved.

Existence of Corporate Form in India: A Conceptual Study
-- Atanu Adhikari

The Indian corporate sector has undergone considerable change during trade liberalization, deregulation and globalization. However, minority shareholders still remain uncomfortable. This is because the family firms in India work in pyramid structure and exploit the shareholders through transaction juggleries; MNCs are subjected to severe agency problems. This article addresses both these issues and raises a question about the fate of corporate form in India.

© 2005 IUP. All Rights Reserved.