Assistant Professor, Department of Management, Chaudhary Ranbir Singh University, Jind (Haryana)
Online published on 12 May, 2017.
An empirical investigation of extent of tunnelling practices in Indian manufacturing sector.
The study is based on assumption that if controlling parties uses Related Party Transactions (RPTs) for tunnelling purpose than it will negatively affects firm's financial performance. And it is more perceptible in Indian manufacturing sector. For the purpose, secondary data related to RPTs and financial performance has been collected for three years (From 2012 to 2015). The analysis has been done using Random Effect panel regression model.
There is a negative impact of RPI on firms’ financial performance and positive impact of RPE on firm's financial performance. Hence, tunnelling is prevalent through RPI.
The use of RPIs for tunnelling purpose by Indian manufacturing sector point out the need to look at their governance practices in a more nuanced manner. The exiting legislations need amendments because they are unable to control such dubious activities.
By determining the extent of tunnelling in RPTs this study provides an analysis of extent of tunnelling practices in Indian manufacturing sector. This has not been researched so far.
Corporate governance, RPTs, Tunnelling, Manufacturing
