Institutional Holdings and Corporate Governance

institutional Holdings and corporeal g all oerningCHAPTER IVAs historied earlier, the need for somatic goernance cabbages from the potential conflicts of reside among voxicipants ( carry checkers) in embodied structure. These ar often referred as agency problems arise from two main sources. First, different dissipateicipants squander different goals and preferences. Second, the discriminateicipants sport light training as to each former(a)s actions, k noprenominal)ledge and preferences. Berle and Means (1932) addressed these conflicts by examining the judicial separation of self-command and attend. They noned that this separation, in the absence of other in unifiedd presidency mechanisms, provide executives with the ability to act in their own expedience sort of than in the bet of sh beholders. However, executives activities argon potentially constrained by legion(predicate) factors that constitute and influence the institution of the corporations that they manage. These factors so-and-so be impression of as either internal find come in mechanisms ( much(prenominal) as the board) or out-of-door control mechanisms ( much(prenominal) as the market for corporate control). An increasely important remote control mechanism affecting g everyplacenment activity worldwide is the emergence of institutional investors as equity owners.Although institutional investors argon the predominant players in several(prenominal) countries financial markets and be on that pointfore important in corporate g everywherening, and the ownershipstructures and other face characteristics differ across markets. These differences atomic number 18 traceable in part to legal and regulatory systems and in part to the appearance in which the markets admit evolved. These characteristics will continue to vary across countries, tip to differences in the role and influences of institutional investors in corporate g everywherenance. Previous researchers hit shown that because of the cost involved, unaccompanied large shareholders flummox the incentive to provide vast monitor of management.Whether institutions as large shareholders should, or will, provide such monitor dep residues in part on the constraints to which they are subjected, their objectives, and their preferences for liquidity.Keeping the high up into consideration, it is given(p) to analyse the intricacies of institutional holdings in the g all all all oernance matters of Indian corporates. Many a time, institutional holdings pre-empts unspoiled corporate g oernance still at other times, good corporate goernment activity endues institutional investiture in the firm. The on-going grapple as to the institutional holdings and the corporate authorities is very acknowledge or interactive in the academics these days too. The answers of earlier studies are ludicrous as to the deterministic value of the one or the other. In the picture psychoanalyse, inc orporated institution collide with index has been developed on the can of find out characteristics of Standard and Poors Transparency and Disclosure Benchmark to rate sampled firms in ground of corporate governance. The institutional holdings in hurt of equity enthronisation has been verbalized in shareages to summarise investment and comparatively, in terms of the sexual notification back news report of the institutional equity investment. This chapter makes a detailed analysis of the dynamics of corporate governance and the institutional holdings in the following three perspectives4.1) kinetics of institutional holdings and its composition4.2) congenatorship amid institutional Holdings (explanatory variable) and the collective organization (dependent variable)4.3) alliance between the integrated politics (explanatory variable) and institutional Holdings (dependent variable)The results obtained for the sampled in this move are describe, in an analytical pitc h, here as under4.1.1) stead of institutional HoldingsThe results obtained for sampled companies as want to the status of institutional holdings in the sampled companies during the survey flow rate two hundred4-08 are summarized in confuse no. 4.1 given downstairs board 4.1Institutional Holdings in the Sampled CompaniesInstitutionalHoldings(%) calculate of Companiescc4N (%)cc5N (%) two hundred6N (%)cc7N (%) two hundred8N (%)Below 56130.55326.54623.04623.04723.55-103417.03115.53015.02613.02713.510-153015.03417.02211.02512.52211.015-263718.54020.04321.54321.54221.026-503618.03819.05427.05527.55527.5Above 50021.0042.0052.5052.5073.5 thoroughcc coulomb two hundred blowcc atomic tot up 6 two hundred hundred two hundred deoxycytidine monophosphateThe reading inputs inform in the open postpone reveals that the symmetrys of institutional holdings in the sampled companies induct increase over the socio-economic classs. The offsprings of companies with larger counterpoises o f institutional holdings defend been change magnitude and the scraps of companies with smaller proportions of holdings progress to been declining over the theatre finale. As institutions induce to a high(prenominal)(prenominal) place 50 per centum holdings in bestowly 1 pct companies in two hundred4, where as in the expiry course of instruction of the force field stream, it increase to 3.5 part. Similarly, institutions wipe out holdings from 26 to 50 share in 18 portion companies in cc4 that rises to 27.5 portion companies in 2008. The same bowel movementfollows for the companies in which institutions begin holdings from 15 to 26 share. The change magnitude go of companies with relatively note institutional holdings alike validates it. As institutions book slight than 5 share stake in 30.5 percentageage companies in 2004, which decreased to alone 23.5 percent companies in 2008. Similarly, institutions lay down holdings up to 10 percent in 1 7 percent companies that reduced to 13.5 percent in the last course of the landing field period. Thus, it is observed that institutional investors have been increase their stake in the sampled companies over the deal period. Hence, it is inferred that institutional investors have been consistently acquire more than than(prenominal) kindle in the sampled companies over the domain period.4.1.2 Constituents of Institutional HoldingsAs noted earlier, Institutional holdings have been further classified into three categories i.e., shared Fund, (Banks, fiscal Institutions and insurance Companies) and Foreign Institutional Investors.The results obtained for the sampled companies as devotion to the status of interchangeable money holdings in relation to the marrow shareholdings and to the thoroughgoing institutional investors in the sampled companies during the force field period 2004-08 are summarized in part (a) and part (b) of the display panel no. 4.2 given below boar d 4.2 (a)MF Holdings in apprisal To Total Shareholdings coarse FundHoldings (%) human activity of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)Below 514070.014371.511758.511356.511959.55-104221.03417.05226.05427.04120.510-15147.0147.02211.02311.52914.515-20031.5073.5073.5073.5073.5Above 20010.5021.0021.0031.5042.0Total200 vitamin C200 coulomb200 form Celsius200 nose candy200 cytosine get across 4.2 (b)MF Holdings in Relation to Total Institutional HoldingsMutual cashHoldings (%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)0-209648.010452.0 light speed50.010351.510150.520-405527.53819.04120.55025.04723.540-602211.02110.52412.0147.02311.560-80094.5189.0199.5168.0178.5Above 80189.0199.5168.0178.5126.0Total200 snow200 degree centigrade200100200100200100The selective instruction inputs account in part (a) of the consecrate get across outline that uncouth cash in hand have change magnitude their proportions of shareholdings in relation to the match shareholdings over the require period. The tot up of sampled companies with higher proportions of joint silver holdings has been change magnitude over the occupy period. Similarly, the flake of sampled companies with take down proportions of coarse lines holdings has been lessen over the same period. As shared cash have more than 20 percent holdings in 0.5 percent companies in 2004, which change magnitude to 2 percent companies at the end of the knowledge period. Similarly, Mutual Funds have holdings to the intent of 20 percent un slight in 1.5 percent companies in 2004 that increased to 3.5 percent companies in 2008. It is likewise observed that thither were only 14 companies in 2004 in which mutual funds holdings were from 10 to 15 percent, which increased to more than double at the end of the take on period. It is also authorise by the observations of the companies in which mutual funds have g dismount stake. on that point were 70 percent companies in which mutual funds had less than 5 percent holdings and the proportion of companies with such holdings reduced to 59.5 percent in 2008. Hence, it is inferred that mutual fund companies have become more enkindle in the sampled companies over the need period.The information inputs report in part (b) of the present display panel reveal out that there is no consistency in the investment pattern of mutual funds in the sampled companies over the reckon period. Mutual fund holdings in relation to broad(a) institutional holdings have remained more or less between zero and 20 percent in about 50 percent companies. On an ordinary in 23 percent companies, mutual funds hold 20 to 40 percent shares. Mutual Funds reduced their holdings in 20 to 40 percent category in sampled companies over the reputation period. Where as there has not been major change in the number of companies with 40 to 60 percent mutual fund holdings. On the other hand, mutual funds have increased their stake from 60 to 80 percent in sampled companies over the scan period. There are 9 companies with such holdings, which increased to 17 companies in 2008. but the number of sampled companies with mutual funds holdings more than 80 percent has gone down over the line of business period. As in 2004, there are 9 percent companies that reduced to 6 percent at the end of the study period. Hence, no inference can be drawn about the investment behaviour of mutual funds in relation to the total institutional holdings in sampled companies over the study period.The results obtained for sampled companies as go through to the status of Banks, FIs and ICs holdings in relation to the total shareholdings and total institutional holdings in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the panel no. 4.3 given below circumvent 4.3 (a)Banks, FIs and ICs Holdings in Relation To Total ShareholdingsBank, FI and IC Holdings (%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)Below 512763.513567.514271.013969.514170.55-103618.02814.02713.53417.02914.510-15199.52412.0199.5189.0189.015-20094.5084.0073.5042.0084.0Above 20094.5052.5052.5052.5042.0Total200100200100200100200100200100Table 4.3 (b)Banks, FIs and ICs Holdings in Relation to Total Institutional HoldingsBanks, FIs and ICs Holdings (%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)0-207035.09045.010351.59949.59949.520-403417.03417.04120.54120.53417.040-602914.53015.0168.02311.53718.560-802110.5136.5178.5157.5084.0Above 804623.03316.52311.52211.02211.0Total200100200100200100200100200100The information inputs reported in the part (a) of the present table depicts that the proportions of Banks, Financial Institutions and Insurance Companies in the sampled companies have fall over the courses. The be racket of companies with land proportions of these holdings have been increasing and the numbers of companies with higher proportions of holdings have been decreasin g over the study period. As in 63.5 percent companies, Banks and others hold less than 5 percent shares in 2004 objet dart in 2008, 70.5 percent companies have the same holdings reflecting that over the study period, the supra category of institutional investors have shown less interest in the sampled companies. Similarly, Banks and others hold up to 10 percent of total shareholdings in 36 companies which reduced to 27 in the year 2006 and finally to 29 companies in the year 2008. Likewise, the number of companies with more than 20 percent holdings has reduced from 4.5 percent in 2004 to 2 percent in 2008. Thus, it is observed that Banks, FIs and ICs have indrawn their full-blooded holdings in some companies while number of companies with marginal holdings has increased. Hence, it is inferred that Banks, FIs and ICs are getting less interested in the sampled companies over the study period.The information inputs reported in the part (b) of the present table depict the results cr ystal clear with the results shown in part (a) as Banks, Financial Institutions and Insurance Companies have decreased their holdings in relation to total institutional holdings in the sampled companies over the study period as well. They have more than 80 percent holdings in 23 percent companies in 2004 but in the last year of the study period, it was just in 11 percent companies. Similarly, these investors had 60 to 80 percent holdings in 21 companies in 2004, but in 2008, the number of companies with such holdings reduced to only 8 companies. The same is validated by the relative increase in the number of companies with relatively lower holdings. Banks and others held to the saltation of 20 percent shares in 70 companies in 2004 and in 2008, the number of companies with such holdings rose to 99. These investors have shown more interest in increasing their holdings from 40 percent to 60 percent in the sampled companies over the study period as they had such holdings in 14.5 perc ent companies in 2004 that increased to 18.5 percent in the last year of the study period. Thus, it is observed that the above-mentioned investors are gradually reducing their stakes to the lower levels in proportion to total institutional holdings in the sampled companies over the study period. Hence, it is inferred that Banks, FIs and ICs have been loosing interest in the sampled companies.The results obtained for sampled companies as regard to the status of FII holdings in relation to the total shareholdings and to the total institutional investors in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.4 given belowTable 4.4 (a)FII Holdings in Relation To Total ShareholdingsFII Holdings(%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)Below 513366.511457.010351.510050.09246.05-102914.53015.02412.02412.03618.010-15178.52211.02311.52311.52613.015-20094.5136.5157.52512.5189.020-26126.02110.53517.52814.0281 4.0Total200100200100200100200100200100Table 4.4 (b)FII Holdings in Relation to Total Institutional HoldingsFII Holdings(%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)0-2011557.58341.57437.06934.56231.020-402010.03517.53316.52814.03919.540-602914.53618.03316.53417.04321.560-802311.52512.53517.54020.03316.5Above 80136.52110.52512.52914.52311.5Total200100200100200100200100200100The information inputs reported in the part (a) of the present table reveals that the proportions of FII holdings in relation to total shareholdings in the sampled companies have increased over the years. The numbers of companies with higher proportions of FII holdings have been increasing and the numbers of companies with smaller proportions have been decreasing over the study period. As FIIs have 20 to 26 percent holdings in only 6 percent companies in 2004, where as in the last year of the study period, it increased to 14 percent. Similarly, FIIs have holdings from 15 to 20 percent in 9 co mpanies in 2004 that got treble to 18 companies in 2008. The same trend follows for the companies with FII holdings from 10 to 15 percent. FIIs had such holdings in 17 companies only in 2004 but in the last year of the study period, it increased to 26 companies. The decreasing number of companies with relatively lower FII holdings also validates it. In nutshell, the FIIs have been consistently increasing their stake in relation to the total shareholdings in the sampled companies over the study period. Hence, it is inferred that institutional investors have been consistently getting more interested in the sampled companies over the study period.The information inputs reported in the part (b) of the present table also depict results consistent with the results shown for part (a). The proportion of FII holdings in relation to the institutional holdings in the sampled companies has also increased over the years. As institutions had above 80 percent holdings in only 6.5 percent companie s in 2004, where as in the last year of the study period, it increased to 11.5 percent companies. Similarly, FIIs had holdings from 60 to 80 percent in 23 companies in 2004 that increased to 33 companies in 2008. The same trend follows for the companies with FII holdings from 40 to 60 percent. The decreasing number of companies with relatively lower FII holdings also validates it. As FIIs have less than 20 percent stake in 57.5 percent companies in 2004 which reduced to only 31 percent companies in 2008. Hence, it is inferred that FIIs have shown more interest in the sampled companies over the study period.ResumeIt can be observed from the result outputs of the offshoot separate that the institutional investors have increased their proportional holdings in the companies over the years. The number of sampled companies is consistently increasing with higher institutional holdings where as the number of companies are decreasing with lower proportions of institutional holdings. The mu tual fund investors have also increased their holdings in relation to the total shareholdings over the study period. The number of companies with higher mutual fund holdings has been increasing over the years. Similarly, the number of companies with lower mutual fund holdings has been decreasing over the study period. But the results of observations of mutual fund holdings in relation to total institutional holdings republic otherwise. Mutual funds have increased their proportions of holdings to the total shareholdings in the sampled companies over the study period but it is not so in relation to the total institutional holdings. Therefore, the investment pattern of mutual funds is not clear. Where as Banks, Financial Institutions and Insurance Companies have decreased their proportional holdings in the sampled companies over the study period. There has been decline in the number of sampled companies with higher proportion of the Banks, FIs and ICs holdings. Validating the same, th e numbers of companies with lower proportion of above holdings have been increasing over the study period. The results are consistent for the proportion of Banks, FIs and ICs in relation to total institutional holdings as well. To the contrary, unlike institutional investors have increased their proportional holdings in the sampled companies over the years. The number of companies is increasing with higher FII holdings and the number of companies is decreasing with lower proportion of FII holdings. The results are identical in relation to the total institutional holdings as well. Hence, at the end of the section it is inferred on the basis of result outputs that institutional investors in total and foreign institutional investors are getting more interested in the sampled companies over the study period. Banks, financial institutions and insurance companies are getting less interested in the same companies over the study period. And the results are indeterminate for the mutual fu nds.4.2.1 Status of corporal Governance make up in Sampled CompaniesThe collective Governance status of sampled companies is depicted in table 4.5. Total sampled of 200 companies has been change integrity into four quartiles of 50 companies each. The first quartile shows the gild codes with highest corporate governance check offs with in the tramp of 58 to 76 with the reasonable bill of 62.5. The second quartile shows the company codes with higher corporate governance lots with in the range of 52 to 58 with the fair(a) make of 54.3. The third quartile shows the company codes with lower corporate governance have with in the range of 46 to 52 with the average punctuate of 48.7.The fourth quartile shows the company codes with lowest corporate governance get ahead with in the range of 26 to 46 with the average malt whiskey of 40.04.Table 4.5Status of Corporate Governance in Sampled CompaniesSampled CompaniesNumber of CompaniesSampled political party (Code)Range average outGovernanceScoreQ1502,5,6,11,13,15,21,26,27,28,29,37,39,41,42,47,48,53,56,68,69,71,72,75,76,7778,79,84,86,88,91,93,96,97,98,102,104,106,119,124,132,135,147,171,173180,189,194,19858-7662.5Q25010,17,18,30,31,33,34,36,38,45,46,52,54,55,57,58,60,61,62,63,64,65,80,85,100,101,103,108,117,118,121,125,134,142,149,150,156,160,167,170,175,177,179,183,184,185,186,187,190,19752-5854.3Q3501,3,4,9,14,16,19,20,23,40,43,44,50,59,66,70,73,74,82,83,92,94,99,105,107,109,110,113,115,120,123,123,127,129,130,137,139,151,152,154,155,162,163,165,169,182,188,192,196,20046-5248.7Q4507,8,12,22,24,25,32,35,49,51,81,87,89,90,95,111,112,114,116,122,126,128,131,133,136,138,140,141,143,144,145,146,148,153,157,158,159,161,164,166,168,172,174,176,178,181,191,193,195,19926-4640.044.2.2 relationship between institutional holdings and corporate governanceThe results obtained in this regard are reported in an analytical frame in table no. 4.6 as underPart (a) of the present study table reveals out the (%) institution al holdings along with corporate governance report for the study period 2004-08. Part (b) of the table depicts the regression parameters as regard to institutional holdings and corporate governance scoreTable 4.6 (a)Institutional Holdings and Corporate GovernanceInstitutional Holdings(%)Corporate Governance Score20042005200620072008N second-rateN fair(a)NAverageNAverageNAverage0-109547.848447.447646.747247.067447.4210-256453.507052.796252.216351.446051.5325-503956.514256.435756.326056.375955.80Above500250.500456.000555.000552.600754.43200200200200200Table 4.6 (b)Institutional Holdings and Corporate GovernanceInstitutionalHoldings(%)Corporate Governance Score20042005200620072008Constant47.1846.9846.6446.6447.05b Value0.430.430.430.430.40SE0.840.860.910.910.91R20.190.190.180.180.16t-value6.75*6.73*6.63*6.63*6.21*D/W1.825.8251.8681.841.78Predictor Institutional Holdings Dependent Variable Corporate Governance Score*Significant at 5 percent levelThe information inputs reported in part (a) of the present table reveals out that the larger proportions of institutional holdings (to the level of 50 percent) have higher corporate governance score in sampled companies over the study period. Similarly, the smaller proportions of institutional holdings have lower governance scores in the sampled companies over the study period. The sampled companies in which institutional holdings are from 25 to 50 percent have the average corporate governance score of 56.51 points in 2004, 56.32 points in 2006 and 55.80 points in 2008. These score points are highest in all the years. Where as lower governance scores are observed for lower proportions of institutional holdings. As the sampled companies in which institutional holdings are to the level of 10 percent have poor average governance scores. They are 47.84 score points in 2004, 46.74 score points in 2006 and 47.42 score points in 2008. Similarly, the sampled companies with 10 to 25 percent institutional holdings have higher corpo rate governance scores than the companies with lower holdings and lower governance scores than the companies with higher institutional holdings over the study period. It can be inferred from the above results that there is very strong and positive relationship between institutional holdings and Corporate Governance.The statistical significance of these findings through regression analysis is reported in the part (b) of the present table. The parameters also validate the above inference, as the degree of dependence between two variables is higher over the study period. each(prenominal) the values are also considered significant (a=0.05) in terms of t-value over the study period. D/W value is near 2 in all the five years indicating the regression results are reliable.4.2.3 Relationship between mutual funds holdings and corporate governanceThe results obtained in this regard are reported in an analytical frame in table no. 4.7 as underPart (a) of the present study table reveals out th e (%) mutual funds holdings along with corporate governance score for the study period 2004-08. Part (b) of the table depicts the regression parameters as regard to mutual funds holdings and corporate governance scoreTable 4.7 (a)MF Holdings and Corporate GovernanceMutual Fund HoldingsCorporate Governance Score20042005200620072008(%)NAverageNAverageNAverageNAverageNAverage0-514050.514351.011750.911350.611950.35-104251.83450.95252.05452.54153.610-151455.21454.22251.423Institutional Holdings and Corporate GovernanceInstitutional Holdings and Corporate GovernanceCHAPTER IVAs noted earlier, the need for corporate governance arises from the potential conflicts of interest among participants (stakeholders) in corporate structure. These are often referred as agency problems arise from two main sources. First, different participants have different goals and preferences. Second, the participants have imperfect information as to each others actions, knowledge and preferences. Berle and Means (1932) addressed these conflicts by examining the separation of ownership and control. They noted that this separation, in the absence of other corporate governance mechanisms, provide executives with the ability to act in their own self-interest rather than in the interest of shareholders. However, executives activities are potentially constrained by numerous factors that constitute and influence the governance of the corporations that they manage. These factors can be thought of as either internal control mechanisms (such as the board) or external control mechanisms (such as the market for corporate control). An increasingly important external control mechanism affecting governance worldwide is the emergence of institutional investors as equity owners.Although institutional investors are the predominant players in some countries financial markets and are therefore important in corporate governance, yet the ownershipstructures and other governance characteristics differ across mark ets. These differences are attributable in part to legal and regulatory systems and in part to the manner in which the markets have evolved. These characteristics will continue to vary across countries, leading to differences in the role and influences of institutional investors in corporate governance. Previous researchers have shown that because of the costs involved, only large shareholders have the incentive to provide extensive monitoring of management.Whether institutions as large shareholders should, or will, provide such monitoring depends in part on the constraints to which they are subjected, their objectives, and their preferences for liquidity.Keeping the above into consideration, it is pertinent to examine the intricacies of institutional holdings in the governance matters of Indian corporates. Many a time, institutional holdings pre-empts good corporate governance still at other times, good corporate governance endues institutional investment in the firm. The ongoing d ebate as to the institutional holdings and the corporate governance is very live or interactive in the academics these days too. The results of earlier studies are inconclusive as to the deterministic value of the one or the other. In the present study, Corporate Governance Score index has been developed on the basis of key characteristics of Standard and Poors Transparency and Disclosure Benchmark to rate sampled firms in terms of corporate governance. The institutional holdings in terms of equity investment has been expressed in percentages to total investment and comparatively, in terms of the relative composition of the institutional equity investment. This chapter makes a detailed analysis of the dynamics of corporate governance and the institutional holdings in the following three perspectives4.1) Dynamics of institutional holdings and its composition4.2) Relationship between Institutional Holdings (explanatory variable) and the Corporate Governance (dependent variable)4.3) Re lationship between the Corporate Governance (explanatory variable) and Institutional Holdings (dependent variable)The results obtained for the sampled in this regard are reported, in an analytical frame, here as under4.1.1) Status of Institutional HoldingsThe results obtained for sampled companies as regard to the status of institutional holdings in the sampled companies during the study period 2004-08 are summarized in table no. 4.1 given belowTable 4.1Institutional Holdings in the Sampled CompaniesInstitutionalHoldings(%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)Below 56130.55326.54623.04623.04723.55-103417.03115.53015.02613.02713.510-153015.03417.02211.02512.52211.015-263718.54020.04321.54321.54221.026-503618.03819.05427.05527.55527.5Above 50021.0042.0052.5052.5073.5Total200100200100200100200100200100The information inputs reported in the present table reveals that the proportions of institutional holdings in the sampled companies have increased over the yea rs. The numbers of companies with larger proportions of institutional holdings have been increasing and the numbers of companies with smaller proportions of holdings have been declining over the study period. As institutions have above 50 percent holdings in only 1 percent companies in 2004, where as in the last year of the study period, it increased to 3.5 percent. Similarly, institutions have holdings from 26 to 50 percent in 18 percent companies in 2004 that rises to 27.5 percent companies in 2008. The same trendfollows for the companies in which institutions have holdings from 15 to 26 percent. The decreasing number of companies with relatively lower institutional holdings also validates it. As institutions have less than 5 percent stake in 30.5 percent companies in 2004, which reduced to only 23.5 percent companies in 2008. Similarly, institutions have holdings up to 10 percent in 17 percent companies that reduced to 13.5 percent in the last year of the study period. Thus, it i s observed that institutional investors have been increasing their stake in the sampled companies over the study period. Hence, it is inferred that institutional investors have been consistently getting more interested in the sampled companies over the study period.4.1.2 Constituents of Institutional HoldingsAs noted earlier, Institutional holdings have been further classified into three categories i.e., Mutual Fund, (Banks, Financial Institutions and Insurance Companies) and Foreign Institutional Investors.The results obtained for the sampled companies as regard to the status of Mutual Funds holdings in relation to the total shareholdings and to the total institutional investors in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.2 given belowTable 4.2 (a)MF Holdings in Relation To Total ShareholdingsMutual FundHoldings (%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)Below 514070.014371.511758.511356 .511959.55-104221.03417.05226.05427.04120.510-15147.0147.02211.02311.52914.515-20031.5073.5073.5073.5073.5Above 20010.5021.0021.0031.5042.0Total200100200100200100200100200100Table 4.2 (b)MF Holdings in Relation to Total Institutional HoldingsMutual FundsHoldings (%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)0-209648.010452.010050.010351.510150.520-405527.53819.04120.55025.04723.540-602211.02110.52412.0147.02311.560-80094.5189.0199.5168.0178.5Above 80189.0199.5168.0178.5126.0Total200100200100200100200100200100The information inputs reported in part (a) of the present table depict that mutual funds have increased their proportions of shareholdings in relation to the total shareholdings over the study period. The number of sampled companies with higher proportions of mutual funds holdings has been increasing over the study period. Similarly, the number of sampled companies with lower proportions of mutual funds holdings has been decreasing over the same period. As mutual funds have more than 20 percent holdings in 0.5 percent companies in 2004, which increased to 2 percent companies at the end of the study period. Similarly, Mutual Funds have holdings to the extent of 20 percent only in 1.5 percent companies in 2004 that increased to 3.5 percent companies in 2008. It is also observed that there were only 14 companies in 2004 in which mutual funds holdings were from 10 to 15 percent, which increased to more than double at the end of the study period. It is also validated by the observations of the companies in which mutual funds have lower stake. There were 70 percent companies in which mutual funds had less than 5 percent holdings and the proportion of companies with such holdings reduced to 59.5 percent in 2008. Hence, it is inferred that mutual fund companies have become more interested in the sampled companies over the study period.The information inputs reported in part (b) of the present table reveal out that there is no consistency in t he investment pattern of mutual funds in the sampled companies over the study period. Mutual fund holdings in relation to total institutional holdings have remained more or less between zero and 20 percent in about 50 percent companies. On an average in 23 percent companies, mutual funds hold 20 to 40 percent shares. Mutual Funds reduced their holdings in 20 to 40 percent category in sampled companies over the study period. Where as there has not been major change in the number of companies with 40 to 60 percent mutual fund holdings. On the other hand, mutual funds have increased their stake from 60 to 80 percent in sampled companies over the study period. There are 9 companies with such holdings, which increased to 17 companies in 2008. But the number of sampled companies with mutual funds holdings more than 80 percent has gone down over the study period. As in 2004, there are 9 percent companies that reduced to 6 percent at the end of the study period. Hence, no inference can be d rawn about the investment behaviour of mutual funds in relation to the total institutional holdings in sampled companies over the study period.The results obtained for sampled companies as regard to the status of Banks, FIs and ICs holdings in relation to the total shareholdings and total institutional holdings in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.3 given belowTable 4.3 (a)Banks, FIs and ICs Holdings in Relation To Total ShareholdingsBank, FI and IC Holdings (%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)Below 512763.513567.514271.013969.514170.55-103618.02814.02713.53417.02914.510-15199.52412.0199.5189.0189.015-20094.5084.0073.5042.0084.0Above 20094.5052.5052.5052.5042.0Total200100200100200100200100200100Table 4.3 (b)Banks, FIs and ICs Holdings in Relation to Total Institutional HoldingsBanks, FIs and ICs Holdings (%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)0-20 7035.09045.010351.59949.59949.520-403417.03417.04120.54120.53417.040-602914.53015.0168.02311.53718.560-802110.5136.5178.5157.5084.0Above 804623.03316.52311.52211.02211.0Total200100200100200100200100200100The information inputs reported in the part (a) of the present table depicts that the proportions of Banks, Financial Institutions and Insurance Companies in the sampled companies have decreased over the years. The numbers of companies with lower proportions of these holdings have been increasing and the numbers of companies with higher proportions of holdings have been decreasing over the study period. As in 63.5 percent companies, Banks and others hold less than 5 percent shares in 2004 while in 2008, 70.5 percent companies have the same holdings reflecting that over the study period, the above category of institutional investors have shown less interest in the sampled companies. Similarly, Banks and others hold up to 10 percent of total shareholdings in 36 companies which reduced to 27 in the year 2006 and finally to 29 companies in the year 2008. Likewise, the number of companies with more than 20 percent holdings has reduced from 4.5 percent in 2004 to 2 percent in 2008. Thus, it is observed that Banks, FIs and ICs have withdrawn their substantial holdings in some companies while number of companies with marginal holdings has increased. Hence, it is inferred that Banks, FIs and ICs are getting less interested in the sampled companies over the study period.The information inputs reported in the part (b) of the present table depict the results coherent with the results shown in part (a) as Banks, Financial Institutions and Insurance Companies have decreased their holdings in relation to total institutional holdings in the sampled companies over the study period as well. They have more than 80 percent holdings in 23 percent companies in 2004 but in the last year of the study period, it was just in 11 percent companies. Similarly, these investors had 60 to 80 percent holdings in 21 companies in 2004, but in 2008, the number of companies with such holdings reduced to only 8 companies. The same is validated by the proportional increase in the number of companies with relatively lower holdings. Banks and others held to the limit of 20 percent shares in 70 companies in 2004 and in 2008, the number of companies with such holdings rose to 99. These investors have shown more interest in increasing their holdings from 40 percent to 60 percent in the sampled companies over the study period as they had such holdings in 14.5 percent companies in 2004 that increased to 18.5 percent in the last year of the study period. Thus, it is observed that the above-mentioned investors are gradually reducing their stakes to the lower levels in proportion to total institutional holdings in the sampled companies over the study period. Hence, it is inferred that Banks, FIs and ICs have been loosing interest in the sampled companies.The results obtained for sample d companies as regard to the status of FII holdings in relation to the total shareholdings and to the total institutional investors in the sampled companies during the study period 2004-08 are summarized in part (a) and part (b) of the table no. 4.4 given belowTable 4.4 (a)FII Holdings in Relation To Total ShareholdingsFII Holdings(%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)Below 513366.511457.010351.510050.09246.05-102914.53015.02412.02412.03618.010-15178.52211.02311.52311.52613.015-20094.5136.5157.52512.5189.020-26126.02110.53517.52814.02814.0Total200100200100200100200100200100Table 4.4 (b)FII Holdings in Relation to Total Institutional HoldingsFII Holdings(%)Number of Companies2004N (%)2005N (%)2006N (%)2007N (%)2008N (%)0-2011557.58341.57437.06934.56231.020-402010.03517.53316.52814.03919.540-602914.53618.03316.53417.04321.560-802311.52512.53517.54020.03316.5Above 80136.52110.52512.52914.52311.5Total200100200100200100200100200100The information inputs repor ted in the part (a) of the present table reveals that the proportions of FII holdings in relation to total shareholdings in the sampled companies have increased over the years. The numbers of companies with higher proportions of FII holdings have been increasing and the numbers of companies with smaller proportions have been decreasing over the study period. As FIIs have 20 to 26 percent holdings in only 6 percent companies in 2004, where as in the last year of the study period, it increased to 14 percent. Similarly, FIIs have holdings from 15 to 20 percent in 9 companies in 2004 that got doubled to 18 companies in 2008. The same trend follows for the companies with FII holdings from 10 to 15 percent. FIIs had such holdings in 17 companies only in 2004 but in the last year of the study period, it increased to 26 companies. The decreasing number of companies with relatively lower FII holdings also validates it. In nutshell, the FIIs have been consistently increasing their stake in re lation to the total shareholdings in the sampled companies over the study period. Hence, it is inferred that institutional investors have been consistently getting more interested in the sampled companies over the study period.The information inputs reported in the part (b) of the present table also depict results consistent with the results shown for part (a). The proportion of FII holdings in relation to the institutional holdings in the sampled companies has also increased over the years. As institutions had above 80 percent holdings in only 6.5 percent companies in 2004, where as in the last year of the study period, it increased to 11.5 percent companies. Similarly, FIIs had holdings from 60 to 80 percent in 23 companies in 2004 that increased to 33 companies in 2008. The same trend follows for the companies with FII holdings from 40 to 60 percent. The decreasing number of companies with relatively lower FII holdings also validates it. As FIIs have less than 20 percent stake in 57.5 percent companies in 2004 which reduced to only 31 percent companies in 2008. Hence, it is inferred that FIIs have shown more interest in the sampled companies over the study period.ResumeIt can be observed from the result outputs of the first section that the institutional investors have increased their proportional holdings in the companies over the years. The number of sampled companies is consistently increasing with higher institutional holdings where as the number of companies are decreasing with lower proportions of institutional holdings. The mutual fund investors have also increased their holdings in relation to the total shareholdings over the study period. The number of companies with higher mutual fund holdings has been increasing over the years. Similarly, the number of companies with lower mutual fund holdings has been decreasing over the study period. But the results of observations of mutual fund holdings in relation to total institutional holdings state otherw ise. Mutual funds have increased their proportions of holdings to the total shareholdings in the sampled companies over the study period but it is not so in relation to the total institutional holdings. Therefore, the investment pattern of mutual funds is not clear. Where as Banks, Financial Institutions and Insurance Companies have decreased their proportional holdings in the sampled companies over the study period. There has been decline in the number of sampled companies with higher proportion of the Banks, FIs and ICs holdings. Validating the same, the numbers of companies with lower proportion of above holdings have been increasing over the study period. The results are consistent for the proportion of Banks, FIs and ICs in relation to total institutional holdings as well. To the contrary, foreign institutional investors have increased their proportional holdings in the sampled companies over the years. The number of companies is increasing with higher FII holdings and the numb er of companies is decreasing with lower proportion of FII holdings. The results are similar in relation to the total institutional holdings as well. Hence, at the end of the section it is inferred on the basis of result outputs that institutional investors in total and foreign institutional investors are getting more interested in the sampled companies over the study period. Banks, financial institutions and insurance companies are getting less interested in the same companies over the study period. And the results are inconclusive for the mutual funds.4.2.1 Status of Corporate Governance Score in Sampled CompaniesThe Corporate Governance status of sampled companies is depicted in table 4.5. Total sampled of 200 companies has been divided into four quartiles of 50 companies each. The first quartile shows the company codes with highest corporate governance scores with in the range of 58 to 76 with the average score of 62.5. The second quartile shows the company codes with higher cor porate governance scores with in the range of 52 to 58 with the average score of 54.3. The third quartile shows the company codes with lower corporate governance scores with in the range of 46 to 52 with the average score of 48.7.The fourth quartile shows the company codes with lowest corporate governance scores with in the range of 26 to 46 with the average score of 40.04.Table 4.5Status of Corporate Governance in Sampled CompaniesSampled CompaniesNumber of CompaniesSampled Company (Code)RangeAverageGovernanceScoreQ1502,5,6,11,13,15,21,26,27,28,29,37,39,41,42,47,48,53,56,68,69,71,72,75,76,7778,79,84,86,88,91,93,96,97,98,102,104,106,119,124,132,135,147,171,173180,189,194,19858-7662.5Q25010,17,18,30,31,33,34,36,38,45,46,52,54,55,57,58,60,61,62,63,64,65,80,85,100,101,103,108,117,118,121,125,134,142,149,150,156,160,167,170,175,177,179,183,184,185,186,187,190,19752-5854.3Q3501,3,4,9,14,16,19,20,23,40,43,44,50,59,66,70,73,74,82,83,92,94,99,105,107,109,110,113,115,120,123,123,127,129,130, 137,139,151,152,154,155,162,163,165,169,182,188,192,196,20046-5248.7Q4507,8,12,22,24,25,32,35,49,51,81,87,89,90,95,111,112,114,116,122,126,128,131,133,136,138,140,141,143,144,145,146,148,153,157,158,159,161,164,166,168,172,174,176,178,181,191,193,195,19926-4640.044.2.2 Relationship between institutional holdings and corporate governanceThe results obtained in this regard are reported in an analytical frame in table no. 4.6 as underPart (a) of the present study table reveals out the (%) institutional holdings along with corporate governance score for the study period 2004-08. Part (b) of the table depicts the regression parameters as regard to institutional holdings and corporate governance scoreTable 4.6 (a)Institutional Holdings and Corporate GovernanceInstitutional Holdings(%)Corporate Governance Score20042005200620072008NAverageNAverageNAverageNAverageNAverage0-109547.848447.447646.747247.067447.4210-256453.507052.796252.216351.446051.5325-503956.514256.435756.326056.375955.80Abo ve500250.500456.000555.000552.600754.43200200200200200Table 4.6 (b)Institutional Holdings and Corporate GovernanceInstitutionalHoldings(%)Corporate Governance Score20042005200620072008Constant47.1846.9846.6446.6447.05b Value0.430.430.430.430.40SE0.840.860.910.910.91R20.190.190.180.180.16t-value6.75*6.73*6.63*6.63*6.21*D/W1.825.8251.8681.841.78Predictor Institutional Holdings Dependent Variable Corporate Governance Score*Significant at 5 percent levelThe information inputs reported in part (a) of the present table reveals out that the larger proportions of institutional holdings (to the level of 50 percent) have higher corporate governance score in sampled companies over the study period. Similarly, the smaller proportions of institutional holdings have lower governance scores in the sampled companies over the study period. The sampled companies in which institutional holdings are from 25 to 50 percent have the average corporate governance score of 56.51 points in 2004, 56.32 points in 2006 and 55.80 points in 2008. These score points are highest in all the years. Where as lower governance scores are observed for lower proportions of institutional holdings. As the sampled companies in which institutional holdings are to the level of 10 percent have poor average governance scores. They are 47.84 score points in 2004, 46.74 score points in 2006 and 47.42 score points in 2008. Similarly, the sampled companies with 10 to 25 percent institutional holdings have higher corporate governance scores than the companies with lower holdings and lower governance scores than the companies with higher institutional holdings over the study period. It can be inferred from the above results that there is very strong and positive relationship between institutional holdings and Corporate Governance.The statistical significance of these findings through regression analysis is reported in the part (b) of the present table. The parameters also validate the above inference, as the degr ee of dependence between two variables is higher over the study period. All the values are also considered significant (a=0.05) in terms of t-value over the study period. D/W value is near 2 in all the five years indicating the regression results are reliable.4.2.3 Relationship between mutual funds holdings and corporate governanceThe results obtained in this regard are reported in an analytical frame in table no. 4.7 as underPart (a) of the present study table reveals out the (%) mutual funds holdings along with corporate governance score for the study period 2004-08. Part (b) of the table depicts the regression parameters as regard to mutual funds holdings and corporate governance scoreTable 4.7 (a)MF Holdings and Corporate GovernanceMutual Fund HoldingsCorporate Governance Score20042005200620072008(%)NAverageNAverageNAverageNAverageNAverage0-514050.514351.011750.911350.611950.35-104251.83450.95252.05452.54153.610-151455.21454.22251.423