Corporate Governance and Disclosure Practices in India: Domestic Firms Versus Cross-Listed Firms

Abstract

Cross-listing involves a situation where a firm that is already trading on its home country stock exchange decides to also list on an international exchange. Hence, cross-listed firms face two conflicting pressures in global business environment. They face two institutional environments, viz., the external environment of host country where stock is originally cross-listed and the internal environment of home country where stock is originally listed. However, for domestic listed firms, there is limited pressure to adapt to the local environment only arising from legal and regulatory environment of home country. Hence, it is possible that cross-listed firms, i.e., multiple listed firms, internalize some aspects of foreign regulation of their host country and exhibit higher level of corporate governance and disclosure. This study supports this reasoning and finds that cross-listed firms disclose more information than those with listing only in home country. This research confirms that there is statistically significant difference between corporate governance and disclosure scores of Indian domestic firms and cross-listed firms. This research provides insight regarding the question of how a country’s legal environment may influence the effectiveness of firm-level corporate governance mechanisms.

Keywords: Corporate Governance, Disclosure, Clause 49, Financial Reporting, Cross-listing