Hyderabad: When the promoter of family-owned companies promised their shares to often raise capital, it often leads to a decrease in the value of the company and underinvestment in innovation and increases the risk of high accidents.
This has been expressed by the Indian School of Business (ISB) study.
This research, which evaluated data on 1,492 companies listed on the Indian national stock exchange from 2009 to 2019, found that both of the level of guarantee and the consequences of related governance were relatively wrong for non-family companies.
Promises are generally associated with a decrease in firmvalue for two reasons – the risk of higher accidents and increased promotory risk aversion follows the promise.
This study was written by NuPur Pavan Bang, Sougata Ray, Nandil Bhatia and Kavil Ramachandran from the center of the Thomas Schmidheiny family in ISB.
Anil Ambani was quoted as an example quoted the subhash example of Chandra of Zee Entertainment and Anil Ambani from Reliance there was a group, which lost control of their company because of excess business decisions and excessive promised.
“Based on data from our sample, we document the negative relationship between promoter and R & D guarantees and investment intensity of the company among family companies, with the impact of adverse promises that are slightly emphasized among business group companies (FBGF) compared to the company’s independent family (SFFS ), “he said, added that the company where promoters had promised shares to face their total asset growth.
It is said that the potential for underinvestment in assets and R & D can lead to the company’s long-term competitive advantage promising.
According to research, most companies with guaranteed shares are at risk of losing their promoter capabilities to provide control of the company.