Capital Market and Corporate Governance in India: An Overview of Recent Trends
Corporate Governance Law Review, Vol. 3, No. 3, pp. 255-282, 2007
28 Pages Posted: 21 Jul 2009
Date Written: October 1, 2007
The paper reviews the developments in the capital markets and corporate governance in India since the early 1990s when the government of India adopted the economic liberalization programme. The legislative changes significantly altered the theme of Indian Companies Act 1956, which is based on the Companies Act 1948 (UK). The amendments, such as the permission for nonvoting shares and buybacks, carried the statute away from the earlier “business model” and towards the 'financial model' of the Delaware variety. Simultaneously, the government established the Securities Exchange Board of India (SEBI), patterned on the Securities and Exchange Commission of US. Through a number of other policy measures, the government steered greater investments in the stock market and promoted the stock market as a central institution in the society. The article points out that the reform effort was inspired, at least in part, by the government’s reliance on foreign portfolio inflows into the Indian stock market to fund the country’s trade and current account deficits.
Keywords: India, capital markets, corporate governance, company law, securities law, foreign capital, economic liberalization, economic reforms, financial model of business corporations, trade deficit, current account deficit, foreign portfolio investments
JEL Classification: F32, G10, G18, G30, G38, K22, N25, P33
Suggested Citation: Suggested Citation