A contingency model of board characteristics and foreign institutional investor ownership: the moderating role of firm size and market valuation

Figures & data

Figure 1. Panel A shows the relationship between board size and FII ownership quartiles

Each year, observations are sorted into quartiles based on FII ownership percentages.Quartile 1 represents the lowest percentage holdings and quartile 4 represents the highest. Board size is measured as the total number of directors during a year. Panel B shows the relationship between number of independent directors and FII ownership quartiles.

Table A1. Descriptive Statistics of Institutional and Promoter Ownerships

	Mean	Median	Maximum	Minimum
Panel A: Percentage Ownership (# obs = 34,428)
% Institutions	7.60	1.26	88.90	0.00
% FII	3.80	0.00	79.65	0.00
% MF	1.70	0.00	37.43	0.00
% Indian Promoter	44.92	48.89	100.00	0.00
% Foreign Promoter	5.71	0.00	96.75	0.00
Panel B: Percentage Ownership conditional on FII > 0 (# obs = 17,262)
% Institutions	13.95	10.02	88.90	0.00
% FII	7.58	3.77	79.65	0.00
% MF	3.16	0.50	37.43	0.00
% Indian Promoter	43.82	47.57	99.33	0.00
% Foreign Promoter	8.03	0.00	96.57	0.00
Panel C: Percentage Ownership conditional on MF > 0 (# obs = 19,533)
% Institutions	11.91	6.95	88.90	0.00
% FII	5.91	0.91	79.65	0.00
% MF	3.00	0.48	37.43	0.00
% Indian Promoter	44.96	48.86	99.67	0.00
% Foreign Promoter	7.95	0.00	96.57	0.00

Panel A of this table shows descriptive statistics of ownership by important investor categories during the period FY 2005 to FY2019. In India, the fiscal year begins in April and ends in March. The investor categories are (1) Foreign Institutional Investors (FII) (2) Domestic Mutual Funds (MF) (3) Indian Promoters or domestic inside owners (4) Foreign Promoters or foreign inside owners. Panel B shows the ownership statistics for firms that have FII ownership greater than zero. Panel B shows the ownership statistics of firms that have MF ownership greater than zero

Table A2. Summary Statistics the Independent Variables

	Mean	Median	Std.Dev	Min	Max
SIZE (INR Millions)	2175.43	1064.40	2768.83	2.04	13,256.88
VOL (%)	0.02	0.02	0.02	0.00	0.09
RET (%)	9.65	6.69	0.59	−1.79	192.55
RET (−1) (%)	14.85	11.67	0.61	−1.81	195.24
PRICE(INR)	88.31	53.25	91.22	0.05	372.18
PB	1.73	1.28	1.41	0.00	6.29
TURN (INR Millions)	0.00	0.00	0.00	0.00	0.00
BOARDSIZE (Nos)	9.32	9.00	3.03	2.06	16.93
INDEP (Nos)	0.43	0.44	0.15	0.00	1.00

This table presents summary statistics for the explanatory variables used in the study. In India, the fiscal year is from April until March. SIZE is the share price times the shares outstanding, measured each year on the first trading day of January. VOL is the volatility computed as the standard deviation of monthly returns over the 12 months before the fiscal year-end. RET and RET (−1) are the contemporaneous and twelve-month lagged returns, respectively. PB is the market-to-book value, measured on the first trading day of January. TURN is the average yearly turnover for the stock scaled by the yearly average shares outstanding. PRICE is the share price on the first trading day of January. BOARDSIZE represents the total number of directors on the board, and INDEP represents the ratio of the number of outside directors to the board size.

Table A3. Frequency Distribution of Fii Ownership and Summary Statistics by Year

Year	Total # Firms	Total # IO firms	Total # FII	Total % FII	Mean	Median	Maximum	Minimum
2005	1759	1457	778	44.23	5.29	1.28	64.00	0.00
2006	1969	1597	935	47.49	7.18	3.30	67.90	0.00
2007	2180	1757	1054	48.35	8.26	4.24	68.90	0.00
2008	2370	1887	1179	49.75	8.37	4.70	71.00	0.00
2009	2236	1853	1198	53.58	7.22	3.79	74.20	0.00
2010	2541	1997	1244	48.96	6.95	3.39	64.70	0.00
2011	2607	2029	1294	49.64	7.19	3.30	58.60	0.00
2012	2409	1913	1253	52.01	7.26	3.52	65.80	0.00
2013	2587	1958	1241	47.97	7.50	3.67	73.70	0.00
2014	2258	1779	1179	52.21	8.24	4.10	75.70	0.00
2015	2414	1889	1226	50.79	7.75	3.77	79.70	0.00
2016	2388	1834	1129	47.28	8.31	4.51	77.40	0.00
2017	2333	1822	1165	49.94	8.18	4.39	77.30	0.00
2018	2496	1926	1292	51.76	7.57	3.86	74.00	0.00
2019	1881	1528	1095	58.21	7.95	4.42	72.40	0.00

Table A4. Regression Results for Fii Ownership and Board Characteristics

Variables	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8	Model 9	Model 10	Model 11	Model 12
SIZE	0.016***	0.014***	−0.037***	0.007***	0.011***	0.012***	−0.049***	0.014***	0.014***	0.014***	0.014***	0.014***
VOL	−0.305***	−0.266***	−0.243***	−0.272***	−0.265***	−0.264***	−0.250***	−0.205***	−0.267***	−0.266***	−0.263***	−0.207***
RET	−0.007***	−0.007***	−0.007***	−0.007***	−0.007***	−0.007***	−0.007***	−0.008***	−0.007***	−0.007***	−0.007***	−0.009***
RET(−1)	−0.007***	−0.007***	−0.006***	−0.007***	−0.007***	−0.007***	−0.006***	−0.007***	−0.007***	−0.007***	−0.007***	−0.008***
PB	0.005***	0.006***	0.005***	0.006***	0.006***	0.006***	−0.005***	−0.070***	0.001	0.007***	0.003***	−0.079***
TURN	0.008***	0.008***	0.007***	0.008***	0.008***	0.008***	0.007***	0.008***	0.008***	0.008***	0.008***	0.008***
PRICE	0.001	0.000	0.002***	0.000	0.000	0.000	0.002***	0.001**	0.000	0.000	0.000	0.001**
BOARDSIZE		0.019***	−0.136***	0.019***	0.019***	0.020***	−0.141***	0.014***	0.019***	0.019***	0.019***	0.013***
INDEP		0.025***	0.026***	−0.069***	0.025***	0.025***	−0.102***	0.023***	0.024***	0.025***	0.025***	0.020***
DUAL		0.004*	0.004*	0.004**	−0.012	0.004**	0.000	0.004**	0.004**	0.004**	0.004**	0.005**
ATTEND		0.001	0.002**	0.001*	0.001	−0.027***	−0.002	0.001*	0.001	0.001	0.000	0.001*
BOARDSIZE*SIZE			0.024***				0.025***
INDEP*SIZE				0.015***			0.021***
DUAL*SIZE					0.002**		0.001
ATTEND*SIZE						0.004***	0.001
BOARDSIZE*PB								0.036***				0.037***
INDEP*PB									−0.012***			0.024***
DUAL*PB										−0.001		−0.005**
ATTEND*PB											0.006***	0.001
Adj. R 2 (%)	20.05	20.7	24.1	21.1	20.7	20.9	24.7	22.9	20.8	20.7	20.8	23.1
Observations	34,428	34,428	34,428	34,428	34,428	34,428	34,428	34,428	34,428	34,428	34,428	34,428

Significance levels: ***p < 0.001; **p < 0.05; *p < 0.01

This table reports the results of panel regressions of FII ownership on board characteristics, firm characteristics, and the interactions of firm size and book-to-market value with board characteristics. The sample period is from April 2004 to March 2019. SIZE is the log of market capitalization, measured on the first trading day of January. PRICE is the log of the share price on the first trading day of January. VOL is the volatility computed as the standard deviation of monthly returns over the 12 months before the fiscal year-end. RET and RET (−1) are the contemporaneous and twelve-month lagged returns, respectively. PB is the log of market-to-book value, measured on the first trading day of January. TURN is the log of average yearly turnover for the stock scaled by the yearly average shares outstanding. BOARDSIZE is the log of the total number of directors on the board. INDEP is the ratio of total number of outside directors scaled by the board size. Each firm year, DUAL is equal to “1” if the CEO and chairperson of the board is same individual and as “0” if different. Each firm year, ATTEND is equal to “1” if at least one director on the board attends less than 75 percent of the board meetings and “0” otherwise. All regressions include year fixed effects. Except INDEP, DUAL,and ATTEND, all the other variables are winsorized at the 1% and 99% levels.All the data items used to define the variables are from CMIE PROWESS database.