TRANSITIONING PROMOTER LED ORGANIZATIONS TO CORPORATE ORGANIZATIONS

Abstract

This study explores the relationship between promoter ownership and corporate leverage among Indian firms listed
on the Bombay Stock Exchange (BSE) from 2016 to 2018 [1]. Using a correlational and non-experimental research
design, the analysis found a significant negative correlation between promoter ownership and both financial and
debt leverage. Specifically, higher promoter ownership is associated with a reduction in a firm's reliance on debt
financing, suggesting that as promoters gain greater control, they prefer internal funding over external debt. The
regression analysis further confirmed this negative relationship, observing that changes in promoter ownership
correlate with lower financial and debt leverage across both manufacturing and service sectors. These findings
underline the critical role of corporate governance in shaping financial strategies within firms. However, the study
has limitations, including its non-experimental design, reliance on historical data, and focus on the top 500 publicly
traded companies, which may not fully represent the broader market. Future research could explore the causal
mechanisms behind these relationships through experimental or longitudinal approaches, and expand the sample to
include a wider range of firms. Additionally, investigating other external factors such as market conditions and
regulatory changes could provide a more comprehensive understanding of corporate financing decisions in
emerging markets like India [2].