Governance Challenges for Family Controlled Firms while Globalising

Investors in emerging markets invariably encounter exposure to business group effect as majority of the firms are affiliated to family controlled business groups. Evidence suggests that controlling families tend to overlook interests of specific group firms while strategising new growth. This paper examines the wealth effects for business group affiliated firms in the Indian stock market when one of its affiliates announces its decision for a major corporate acquisition abroad. The authors found evidence of positive wealth spill over to other firms in the group due to one of its affiliate's investment decision. This highlights the interconnections between group firms and market reaction to the globalisation moves of business groups.