Tuesday, 21 February 2017

Impact of Ownership Structure on Financial Performance in India

Family businesses since ancient times are base for building a nation due to their contribution towards the GDP of a country and are also employment opportunities created by these . In a developing nation like India the majority of businesses are in the supreme control of the families. It has been estimated that 90% of the business in India is controlled & managed by families. From 'Mom and Pop' Kirana stores to large corporation, groups and SME's we can see the  family run businesses. Most of the giant business houses like Tatas, Ambanis, Birlas, Godrej, Wadias, Anil Aggarwal – Vedanta, Bajaj, Ruias, Ranbaxy  Munjals, Mahindra, Thapars, Mittals, Shaparji Paollonji, Jindals, Adanis, Times of India and many more are all controlled by families. The role of family and the head of the family is quite important in India.  Many researches have been carried out to study the performance of family business & across the world  superiority in performance of family business has been noticed  but in actually  there is  not much significant difference between the performance of both the groups of companies whether we talk in terms of Net Worth, Capital Employed or  Long Term funds.  In terms of liquidity position both the groups of company almost stood at par & There is no significant difference  in terms of current and liquid ratio. However the only  significant difference is in terms of interest coverage and Financial Charge Coverage ratio. Position of non-family business is much risky in these previousy mentioned criterion as compared to family business.Also in India the position and condition of family business is quite competitive as against non-family business. They have reached at par with public limited companies and state owned companies. The family business mainly need to improve in terms of NPM, DE i.e use of leverage, and investment in terms of current assets.

Ms. Meenakshi Chopra
Assistant Professor
Dept. of Management Studies

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