Do Shareholder Activism Effect Corporate Governance and Related Party Transactions: Evidences from India?

Abstract

The study investigates the relationship between corporate governance performance, related party transactions and shareholder activism among listed firms in India. The study provides valuable insights into the impact of shareholder activism on corporate governance performance (CGP) and the occurrence of related party transactions (RPTs). Results infer a significant difference in overall CGP between the firms subjected to shareholder activism and firms not subjected to shareholder activism. The study proposes significant evidence on the close monitoring of the governance practices of the firm by activists’ investor and they respond immediately to any evidence of poor governance practice of the firm. A significant difference was found in the amount of sales to RP prior to the incidence of SA than the post incidence of SA for the firms subjected to SA. However, no such difference was found with respect to other major components of RP.