The Harvard Business School (HBS) Working Knowledge carries an interview of Professor Tarun Khanna of HBS in connection with the release of new book “Billions of Entrepreneurs in India and China”. An excerpt from the book (which compares India and China on a broad range of factors) deals with the availability of company information in India with some references to the nature of the legal system:
“Is it easier to find reliable information about a company in India?
Yes. First, as a result of a legal system derived from the common-law tradition, annual reports provide the rudiments of information that Western observers expect, and familiar rules govern corporate disclosure. Real-time stock market data are readily available on all publicly traded companies, a result of vigorous competition between the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Private-sector intermediaries in India use business models that include information synthesized from company disclosures and intelligence that they gather from the ground. The Centre for Monitoring Indian Economy (CMIE), for example, is a privately owned clearinghouse for reliable information on publicly traded firms and some privately held firms in India. Founded in 1976, CMIE is the brainchild of the entrepreneur Narottam Shah. Numerous credit-rating agencies work off the primary information available from companies and from CMIE to provide risk analyses for debt claimants.”
He then goes on to talk about the vibrancy of the press in India. Further, he states:
“Indian companies and financial institutions are not free from fraud and error. On the contrary, India’s financial scan of 1992, which I discuss at some length in a subsequent chapter, was at least as egregious as the stock market fever that gripped China in the same year. Both countries have seen their share of financial shenanigans, but their responses to the systemic problems in their financial sectors could not be more different. India celebrated information and embraced competition and market forces, whereas China left intact and arguably strengthened government control of the stock exchanges.”
It is not clear whether these remarks can be taken to reflect the general nature of corporate transparency and availability of information in India, but Professor Khanna’s observations indeed show that India fares better on this count than China on a comparative basis (which is really the substance of his study).