Minority shareholder activism in light of the Indian companies act, 2013

Abstract

PurposeThe genesis of “shareholder activism” in the USA may be traced back to several decades, but it only evolved in India at the start of the 21st century. This paper aims to explore the concept of “shareholder activism” in the Indian context, in light of the New Companies Act, 2013. The act is envisioned as a precursor to invoking the intention of shareholders to confront managers. Further, it aims to look at the possibilities of using tools of shareholder activism to make companies aware of their concerns.Design/methodology/approachAuthors explore the concept of shareholder activism with the help of textual analysis, using R. Then, the authors study the mediating effects of “shareholder’s intention towards activism” between the “regulatory mechanisms” and “the usage of various tools of activism”, using the partial least square approach.FindingsRegulatory mechanisms, such as the Companies Act, 2013, enhance the shareholders’ power to sensitise companies towards various corporate governance issues. It also increases their intention towards shareholder activism, eventually leading to favourable opinion on using various tools of “activism” in their investee companies.Practical implicationsThis study is a unique attempt to assess the minority shareholders’ potential to become active in their investee companies induced by changes in the rules and regulations of a country.Originality/valueShareholder activism in India has not been thoroughly explored thus far. This paper specifically studies the opinions of retail investors, who possibly could increase companies’ accountability towards their minority shareholders, especially in light of the New Companies Act, 2013.