Background
In India, large number of companies have higher proportions of shareholdings bypromoters. There were 88 of 153 companies, around the time of this study, with market capitalization above Rs. 100,000 million, in which promoters’ sharewasgreater than 60%’. It has been established long before that wider participation of investors facilitates efficient capital market operation, results in higher liquidity, and helps better price discovery, which is the ultimate objective of any stock Exchange. All these lead to avoiding manipulation and price rigging by dominant players and thus protectretail and minority shareholders’ interest.

“On the other hand dispersed shareholding can be value destructor”, as observed by Manoj Pant and Manoranjan Pattanayak. Their study confirms that ..with an increase in insider ownership stake, firm value initially increases. At the initial level of ownership, either insiders do not have a substantial stake to entrench themselves or they have incentives to perform more to acquire more ownership stakes. The market discipline may force the insiders to pursue value maximisation, despite their lack of personal incentives to do so at this low level of stake. But, when their stake exceeds 20% they have a reasonably high stake in the firm. They play crucial role in the decision-making process”.
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