Abstract:
In the liberalized Indian economy, corporate accountability and investor protection have been grounded upon corporate governance. The growth of the Indian capital markets and frequent corporate scandals, including the Satyam Computer Services fraud (7,136 crore) and the IL&FS crisis (91,000 crore) have highlighted the necessity of transparent governance systems. This paper will look at the changing role of Securities and Exchange Board of India (SEBI) in enhancing corporate governance since its inception by the SEBI Act, 1992. The paper provides an analysis of the extent to which the SEBI quasi-legislative, executive, and quasi-judicial powers determine compliance behavior of listed companies basing on the Companies Act, 2013, and SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015. The study is based on the literature of Sarkar, Bose, Chakrabarti, Madaan, Mishra, and Mohanty, but it uses quantitative data to measure regulatory effectiveness: this includes around 4,000 enforcement actions since 2010, cumulative penalties of over 7,000 crore, and the board independence rate of nearly 52%. Comparative analysis with world regulators of compliance like the U.S. SEC, U.K. FCA and Australia ASIC shows that even though compliance rates have improved by SEBI to 89 percent, there is still a problem of enforcement in that adjudication is delayed, there is lack of pre-emptive oversight and overlapping jurisdiction between the SEBI and the Ministry of Corporate Affairs. The study presents a disconnect between formal compliance and substantive quality of governance, requiring predictive analytics, improving whistleblower protection, special governance courts, and combined digital disclosure systems. By conducting an empirical and normative assessment, the research finds that the interventions by SEBI have gone a long way in enhancing transparency and accountability in corporate India, but sustained governance excellence requires a culture of proactive compliance aided by an active regulation by data and inter-institutional synergy. Keywords: Corporate Governance, SEBI, LODR regulations, companies act 2013, Protection of Investors, Regulatory Reform.
Literature Review:
Corporate governance has become a critical component in ensuring transparency, accountability, and ethical conduct within organisations, particularly in emerging economies like India where regulatory systems are still evolving. The Securities and Exchange Commission of India (SEBI) has played a pivotal role in shaping corporate governance practices through regulatory reforms, policy interventions, and enforcement mechanisms. Over the years, a wealth of literature has examined the SEBI’s contributions, analyzing its effectiveness, limitations, and broader impact on Indian corporate governance. This literature reflects the dynamic interplay between regulatory frameworks, corporate behaviour, and market expectations, highlighting both the progress made and the challenges that persist.
Early research on Indian corporate governance primarily focused on the impact of globalization and the influx of foreign institutional investment. Dahiya and Gupta (2001) argued that increased foreign participation in the Indian market necessitated stricter corporate governance standards to meet global expectations. Their research indicated that despite numerous corporate governance reforms implemented in India to attract foreign capital, enforcement remained relatively weak, limiting the effectiveness of these measures. This phenomenon of strong regulatory intent coupled with insufficient enforcement has repeatedly emerged in various studies, suggesting structural problems within the Indian corporate governance system.
The development of the Securities and Exchange Commission of India (SEBI) as a regulatory body has been extensively documented, particularly the introduction of Section 49 of the Listing Agreement, which marked a significant milestone in the formalization of corporate governance norms in India. Scholars have observed that Section 49 spurred improvements in board composition, audit committee operations, and disclosure requirements. These reforms brought Indian corporate practices closer to international standards. However, subsequent literature has criticized the superficiality of compliance, pointing out that many companies adopt a “checklist” approach rather than integrating governance principles into their organizational culture. This suggests that while regulatory frameworks can enforce structural changes, they do not necessarily guarantee substantive behavioural shifts.
Another key dimension explored in the literature is the role of the Securities and Exchange Commission of India (SEBI) in protecting minority shareholder rights. Regulatory measures such as stricter disclosure requirements, insider trading regulations, and more stringent related-party transaction rules have helped boost investor confidence. Research indicates that these measures have increased transparency and reduced corporate misconduct. However, researchers also highlight the challenges currently faced by minority shareholders, including information asymmetry, limited participation in decision-making, and difficulty in seeking legal remedies. These findings suggest that while the SEBI has made significant progress in strengthening investor protection, further efforts are needed to effectively empower minority shareholders.
The relationship between corporate governance and corporate performance has been a focus of empirical research. Numerous studies have demonstrated a positive correlation between sound corporate governance and improved financial performance, market valuation, and investor confidence. Regulatory initiatives by the Securities and Exchange Commission of India (SEBI), including mandatory disclosure and compliance requirements, have played a role in promoting improved corporate behavior. However, some scholars point out that this relationship is not universally applicable and can be influenced by company characteristics, industry dynamics, and the broader economic environment. This complexity underscores the necessity for meticulous analysis when assessing the impact of corporate governance reforms.
A recurring issue in the literature is the effectiveness of the Securities and Exchange Commission of India’s (SEBI) enforcement mechanisms. While the regulatory framework is often described as comprehensive and well-structured, enforcement challenges such as delayed rulings, relatively low penalties, and procedural inefficiencies have been extensively documented. Researchers argue that even the best-designed regulations may fail to achieve their intended effects without strong enforcement. Furthermore, a lack of coordination between the SEBI and other regulatory bodies, such as the Department of Corporate Affairs, is also considered an obstacle to effective governance. Therefore, strengthening inter-agency cooperation is seen as crucial to improving regulatory effectiveness.
Recent literature has begun to focus on emerging trends and challenges in corporate governance, particularly in the context of digital transformation and sustainable development. The increasing importance of environmental, social, and governance (ESG) factors has prompted the Securities and Exchange Commission of India (SEBI) to introduce initiatives such as the Business Responsibility and Sustainability Reporting (BRSR) framework. Scholars consider this an important step in integrating sustainable development into corporate governance. However, the effectiveness of such initiatives still requires in-depth research, and more empirical studies are needed to assess their impact on corporate behavior and stakeholder interests.
Methodologically, the literature on the Securities and Exchange Commission of India (SEBI) and corporate governance blends qualitative and quantitative approaches. Descriptive studies detail regulatory developments and policy impacts, while empirical studies employ statistical techniques to analyze the relationship between corporate governance practices and firm performance. Despite this methodological diversity, there is a general consensus that more longitudinal and data-driven research is needed to assess the long-term effectiveness of SEBI interventions.
Comparative studies further enrich the literature by placing India’s corporate governance framework within a global context. These studies demonstrate that while India has made significant progress in adopting international best practices, challenges remain in enforcement, transparency, and institutional capacity. Such comparisons highlight the importance of continuous reform and adaptation to address evolving market environments and stakeholder expectations.
In summary, the literature on the role of the Securities and Exchange Commission of India (SEBI) in improving corporate governance provides a comprehensive and detailed account of its impact. The SEBI has played a crucial role in establishing sound regulatory frameworks, promoting transparency, accountability, and investor protection. However, ongoing challenges such as enforcement, compliance quality, and emerging governance issues remain a focus of discussion. Future research should emphasize assessing the effectiveness of recent reforms, particularly in areas such as environmental, social, and governance (ESG) integration and digital governance, while exploring strategies to strengthen enforcement mechanisms and institutional coordination. Ultimately, achieving sustainable improvement in Indian corporate governance requires not only regulatory intervention but also a shift in corporate culture towards ethical and responsible behaviour.
Introduction:
Corporate governance has become a key pillar of the new regulation of corporates, informing theway corporations have been guided, governed, and made responsible. The role of corporategovernance has been heightened in India due to the liberalization of the economy, the integrationof the capital markets and increased involvement of both domestic and foreign investors. Thegovernance failures are no longer confined to individual firm as increasingly Indian corporationsaccess public capital and present systemic risks to financial stability, investor confidence, andeconomic growth. This has led to the transformation of corporate governance as a voluntary bestpractice issue to a mandatory legal requirement. The company governance of corporategovernance in the Indian legal system is based mainly on the Companies Act, 2013 and theSecurities and Exchange Board of India Act, 1992. The Companies Act, 2013 institutionalises the norms of governance concerning the composition of the board, responsibility of the directors,disclosures, audit provisions, and protection of the shareholders. It represents a change in theshareholder-focused approach to a more comprehensive stakeholder-based governance theory. Inaddition to this statutory framework is the regulatory aspect of the Securities and ExchangeBoard of India (SEBI), which is mandated with interest protection of investors and controllingthe securities market. The governance mandate of SEBI has significantly changed especially tothe listed companies where disclosure, transparency, and accountability are the key rules. Thenecessity of the strong regulation of corporate governance in India was repeatedly highlighted bythe great scandals in major corporations. Satyam Computer Services fraud of 2009,2 in whichaccounting falsification amounting to around 7,000 crore was conducted, revealed systemicweaknesses in board supervision, independence of auditors and regulatory supervision. The scandal caused great loss of investor confidence and brought about great reforms in governance.
1 The Companies Act, 2013 (Act No. 18 of 2013).
2 Satyam Computer Services Ltd. fraud (2009).
Almost ten years afterward was the downfall of Infrastructure Leasing & Financial Services
(IL&FS) in 2018, whose debt was estimated to exceed 90,000 crore, which exposed the systemic flaws in governance of large conglomerates and questioned coordination of the rules and controlover the risk factors.Such incidences suggested that being formally obedient in regards togovernance norms are not enough without an effective enforcement and substantive oversight.The role of SEBI as a regulator of corporate governance has also changed about such crises.First, there were the introduction of governance norms of listed companies using Clause 49 of the Listing Agreement that established requirements on board composition, audit committees,disclosures. Clauses 49 was a big step in bringing the standards of Indian governance in line withthe international best practices. Nonetheless, it was contractual and therefore could not beeffectively enforced. In awareness of these shortcomings, SEBI has launched the SEBI (ListingObligations and Disclosure Requirements) Regulations, 2015 (LODR) that unified andrepackaged norms of governance into subordinate legislations which are binding. The LODRframework is indicative of a change in a rule-based model of regulation to a disclosure-basedmodel of regulatory intervention, with transparency as the major tool of market discipline.The academic literature gives a subtle evaluation of the corporate governance regime in India.Proponents of the legal reforms in the case of Sarkar and Sarkar contend that the legal reformscan only improve firm valuation when it is backed by plausible enforcement mechanisms. Boseand Chakrabarti point to the disconnect between the formal standards of governance and the realpractice in the Indian corporations. Madaan focuses on the continuation of the system of adominant promoter as a structural barrier to board independence, and Mishra and Mohanty statethat disclosure norms are becoming better, but the culture of corporations and ethics are notchanging at the same rate. All these academic discussions demonstrate that it is necessary toanalyze the availability of governancerules as well as their practice and results. There arequantitative measures which imply that the intervention of SEBI has produced quantifiablepositive results. There is an improvement in the compliance with the essential governancerequirements over the last ten years, and the overall compliance rates have increased betweenroughly 63 per cent in the early 2010s and almost 89 per cent in the recent years. The level ofboard independence has increased, as well as the disclosure timelines have turned out to bestricter. Meanwhile, SEBI has become more aggressive in its enforcement activities, giving riseto monetary fines that are very large and opening thousands of adjudication cases. Despite thesegains several challenges persist. One important issue is the lack of alignment of formalcompliance with substantive quality of governance. The firms tend to meet the minimum numbers without the actual independence or proper management. Limits to enforcementefficiency include delay in adjudication, inconsistencies in the jurisdictions of SEBI and theMinistry of Corporate Affairs (MCA), and underuse of active risk-detection tools. Moreover,lack of longitudinal data on governance reforms interferes with rigorous empirical assessment ofgovernance reforms. It is against this backdrop that this paper explores the role of SEBI aboutimproving corporate governance in India. It aims to determine the level of compliance that hasbeen attained by SEBI in governance, weigh the quantitative effectiveness of its enforcementprocedures, and recommend reforms that would enhance its regulatory influence. The paper will attempt to give an overall and empirically-based evaluation of the role of SEBI in reformingcorporate governance in India by combining legal analysis, enforcement data, and comparativeperspectives.
Legal and Institutional System:
The SEBI is based on the SEBI Act, 1992 as the main source of its power as a regulator of corporate governance. The Section 11 of the Act provides the general mandate of SEBI to safeguard the interest of the investors and control the securities market. This clause gives SEBI the authority to take action that is deemed by the organisation to ensure that the market develops in an orderly manner and thus regulates intermediaries, listed entities and institutions of the market infrastructure. Section 11B 3goes a step further and empowers SEBI to pass directives upon any individual relating to the securities market either in the interests of the investors or in the interest of market integrity. Section 15HA creates a mechanism of strong financial fines in circumstances of fraudulent and unfair trade practices, which strengthens the capacity of SEBI to deter. The Companies Act, 2013 is implemented to supplement the regulatory framework of SEBI by entrenching the corporate governance requirements in the company law. Sections 134 up to 178 have specifications pertaining to the financial disclosures, duties of directors, audit committees, nomination, and remuneration committees as well as stakeholder relationship committees. Handbook IV expounds the position and responsibilities of the independent directors by focusing on integrity, objective judgments, and accountability. Even though these provisions are administered by the MCA, SEBI implements numerous governance requirements of listed firms under the LODR Regulations, constituting a regulatory layer with numerous interconnections and overlaps.SEBI has quasi-legislative power that is issued in the form of regulations, circulars, andguidelines. The LODR Regulations, 2015 is the most detailed formulation of governancestandards of listed companies, and it brings together various listing arrangements into one pieceof regulation. SEBI has published many circulars since 2015 explaining the disclosure standards,the board duties, and the limitations on the boards to comply with. These tools allow SEBI to beresponsive to new governance issues without necessarily having to amend the laws. Besides therule-making powers it has, SEBI uses the adjudication, inspection, and enforcement proceedingsas quasi-judicial powers.pecial adjudging officers and enforcement departments investigateviolations, hold hearings and punishments. The extent of regulating activity of SEBI isdemonstrated on quantitative evidence. Throughout the last 10 years, SEBI has already issuedhundreds of circulars and launched thousands of adjudications processes each year. SEBI hasbeen getting a steady budgetary allocation, with an institutional growth and specialised enforcement divisions. The enforcement density of SEBI at an estimated 7.7 enforcement actions per 1000 listed companies would rank it between well-established regulators, including the U.S. Securities and Exchange Commission (SEC) and developing nations. Although regulators like SEC and the U.K. Financial Conduct Authority (FCA)5 have greater enforcement ratios, the performance of SEBI indicates an increased use of deterrence and accountability in an emergent market environment. The governance by the SEBI has also been enhanced by judicial interpretation. In SEBI v. The Supreme Court denied any narrow interpretation of its regulatory role as it affirmed that SEBI has the power to regulate public issues and guard the interests of investors and its broad regulatory powers. In Price Waterhouse v. SEBI, which is the appellate forums acknowledged the ability of SEBI to impose punishment to auditors on failure of governance and not only to corporate management but also to the gatekeepers of the corporate in terms of auditors. These cases have strengthened the institutional legitimacy and coverage of enforcement by SEBI.
3 The Securities and Exchange Board of India Act, 1992, s. 11B.
4 The Securities and Exchange Board of India Act, 1992, s. 15HA.
5 Financial Conduct Authority
All in all, SEBI is placed at the center of the corporate governance ecosystem in India due to its legal and institutional framework. The success of this framework however is determined by the translation of the legal authority to timely, consistent, and credible enforcement outcomes.
Impact Analysis Quantitative and Legal Assessment:
To evaluate the relevance of SEBI to corporate governance, it is necessary to review the data on enforcement, the trends of compliance, and market performance. SEBI is said to have carried out over 4,000 enforcement measures over corporate misconduct between 2010 and 2023. Cases of insider trading represented approximately 600 actions, whereas cases of disclosure and reporting violations were almost 1,200. The sums of money fined in this time are approximated to be at the tune of 7,000 crore and indicate a huge increase in the intensity of enforcement. The indicators of compliance show an upward trend. According to SEBI Annual Reports, there has been a gradual rise in compliance with LODR requirements, especially regarding timely financial reporting, establishing the required board committees and authorizing related-party transactions. There is also an increase in the levels of board independence with majority of listed companies exceeding statutory levels. The quality of disclosure as indicated by its timeliness and completeness of filings has also improved in an incremental manner. The connection between corporate performance and governance regulation has been well debated in scholarly literature. Research works like Sreenivasan (2014) and Dahiya and Gupta (2001) indicate that there is a positive relationship between good governance practices and the valuation of the firm, capitalisation of the market, and investor confidence. Indian experience has shown that when there has been upsurge in regulatory enforcement, there has been also an outburst of foreign portfolio investment and market depth though causality is subject to wider macroeconomic conditions.
The enforcement ability of SEBI however demonstrates structural limitations. The number of actions has been on the rise, but adjudication delays have been a problem, especially on complex cases of large conglomerates or promoters with influence. The slow resolution can water down deterrence and kill investor confidence. Such overlapping of jurisdiction with MCA makes enforcement even more complex, giving rise to fragmentation of regulations and making it more prone to have inconsistencies. The other weakness is that enforcement is mostly reactive.
Interventions of SEBI frequently follow the achievement of failures in governance and not the ex-ante prevention of misconduct. Lack of extensive pre-emptive audit supervision, as well as, a little utilisation of predictive analytics, limit proactive regulation. In addition, financial fines, though enormous in totality, do not necessarily correspond to the economic benefits of misconduct, casting doubt on the deterrent function. Nevertheless, the influence of SEBI on the norms of corporate governance is enormous. Greater accountability of directors and auditors,better standards of disclosure and increasing visibility of enforcement have all raised the expectations of governance. The difficulty is in further enriching qualitative governance integrity as opposed to numerical compliance.
Reform Perspective and Comparative Perspective:
A comparative analysis of the work of securities regulators around the world can be a helpful benchmark of measuring the strengths and weaknesses of SEBI and finding tangible ways to improve it. Although institutional, economic, and legal settings vary, the examples of regulators, including the U.S. Securities and Exchange Commission (SEC), 6the U.K. Financial Conduct Authority (FCA), and the Australian Securities and Investments Commission (ASIC),7 are used to shed light on alternative enforcement models, regulatory oversight, and governance that can be used to build upon the growth of SEBI. It is reported that the U.S. SEC has a high enforcement orientation. It is a combination of a high enforcement percentage and large monetary fines, market copes, and criminal referrals. The whistleblower programmed of the Dodd-Frank Act 8is a characteristic of the SEC architecture since it provides monetary incentives, maximum confidentiality, and anti-retaliation benefits to individuals reporting securities law infractions. The framework has seen a significant number of high-value tips being realised and as a result, accounting fraud, insider trading, and disclosure violations are being identified earlier. Empirical research on the U.S. experience indicates that effective whistle blower protection and effectiveness of financial incentives can boost insider reporting, informational flow to the regulator, and discourage bad behaviour even in the absence, because corporate participants internalise the risk of being exposed to the regulator.
6 U.S. Securities and Exchange Commission,
7 Australian Securities and Investments Commission.
8 Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010 (Pub. L. No. 111-203),
The philosophy of the U.K. FCA is quite similar yet complementary. It has a clearly defined
risk-based forward-looking approach. The FCA does not impose homogenous intensity of supervision on all entities, but risk-assessment to enable firms to be categorized in terms of their likely effect on market integrity and consumer protection and their governance risks profile. The supervisory resources are then limited on the so-called systemically or conduct-wise more risky firms; those that are subject to on-site inspections, thematic reviews, and scrutiny of senior management.The Senior Managers and Certification Regime (SM&CR) also take responsibility a step further by charting the responsibilities to individuals and binding firms to certify the fitness and propriety of the key functionaries. This is a nexus point to quality of governance and board level supervision since senior managers cannot easily defuse or evade accountability. In Australia, ASIC gives a different perspective. It gives major focus on continuous disclosures and in real-time or near real-time compliance monitoring. Listed entities have an obligation to release price sensitive information promptly and ASIC actively relies upon market surveillance systems and co-ordination with exchanges to identify aberrant behaviour in trading, failure to disclose price sensitive information and misleading statements. This helps the regulator to act at an early stage as opposed to ex post enforcement when crystallised harm has already occurred. The strategy of ASIC, especially when it is complemented by the exchange-level surveillance and technology-driven tools, indicates that a combination of real-time data analytics with the traditional means of law enforcement is valuable. It is on this comparative basis that several reform pathways become available to SEBI. First, it is possible to enhance protection of the whistleblowers and the incentive systems that might significantly enhance the timely identification of the governance failures in India. The current system of informants adopted by SEBI concerning issues such as insider trading is just a point of departure but has little scope, knowledge, and perceived reputation. Practical experience indicates that a strong legal safeguard against retaliation, explicit guidelines about how an anonymous or confidential reporting can and should be done, and potential monetary incentives provided in case of successful enforcement results are essential design elements. In the case of India, harmonisation with the labor and employment laws and alignment with company-level whistleblowing would be also required so that the internal and external reporting mechanism complement with each other as opposed to them being substitutive or conflicting. Second, a truly risk-based supervision model, backed by superior data analytics, would allow SEBI to use limited enforcement and supervisory resources more effectively. Currently, surveillance by SEBI is seen as an event-based or reactive approach based on complaints, media coverage, or more obvious offenders. A move to systematic risk rating of companies – on quantitative measures of frequency and quality of disclosure, complexity of related-party transactions, ownership structure, patterns of promoter pledging, board structure, and history of compliance would enable SEBI to subject high-risk companies to more intense scrutiny. The experiences of the FCA and ASIC show that this kind of targeted supervision is likely to produce better regulatory returns on effort and can be used to pre-empt governance failures before they develop into large scale scandals. Third, institutional change in the adjudicatory and enforcement apparatus of SEBI is extremely important. The creation of specialised governance benches or divisions within the quasi-judicial structure of SEBI or in cooperation with the Securities Appellate Tribunal (SAT), could help in speeding up the process of handling cases involving governance failures, including the failure of independent directors to discharge their duties, misstatements in corporate disclosure or conflict of interest at the board level. Systemic delays can be mitigated by fast-track mechanisms of adjudication, which have set timetables, summary in simple cases, and specialised technical members who are knowledgeable about corporate governance. Timeliness of enforcement, rather than severity of sanctions as demonstrated by comparative regulators, is a high deterrent: the more imminent and predictable the response to violation, the more immediate and certain is the expected cost of violation. Fourth, reforms based on data match the size and heterogeneity of India especially well. The mass of listed firms, broad heterogeneity in the corporate governance principles, and information asymmetry in the Indian markets are factors that demand the use of algorithms and predictive measures as opposed to mere manual control. SEBI can use predictive analytics models to:
- Patterns of anomalous disclosure (e.g., numerous restatements, late-minute disclosure,and boilerplate disclosure).
- Examine non-independent transaction networks to identify tunnelling, round-tripping, orspecial treatment of promoter-related parties.
- Assess board attributes including tenure, interlocked directorships, diversity, attendanceat meetings, and committee make-ups to determine boards that are institutionallyindependent but captured in substance.
These models would not substitute human judgment but would serve to provide early-warning mechanism to ensure that SEBI can profile cases and organize thematic inspections or governance reviews. Another potential reform option is to create a single corporate governance index approved by the regulator to listed companies in India. The index might be built on objective and publicly verifiable variables taken out of annual reports, exchange files and mandated disclosures, including board independence ratios and the presence and operation of key committees, the quality of related-party transaction disclosures, shareholder rightsmechanisms, the quality of ESG reporting and the quality of historical compliance. Regular release of such an index, possibly in partnership with stock markets or other research institutions, would promote market discipline because institutional and retail investors could use the index to assess the quality of governance at firms and sectors. Inclusion in a higher level of governance or index over time may be converted into a reduced cost of capital, and this may present financial incentives of firms to invest in meaningful governance remedies instead of box-ticking. Regular, formal assessments of directors, as a board, and as individuals, including independent directors, is another untapped resource. Although general board assessment is already a requirement, due to SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, and the company law, the quality and transparency of such assessments are a variable and frequently ritualized aspect. SEBI might, without micromanaging its internal practices, mandate minimum standards, and formats of disclosures of board evaluation, external evaluators of large-cap or high-risk companies, and random inspection by it of the evaluation process. Such evaluations would be strengthened by regulatory backup of such evaluations; to encourage more active and proactive involvement of the independent directors and to discourage the so-called reputation-rental in which people can become directors without serious commitments. Quantitatively, the effect of these reforms, whose results depend on the context, can be modelled. Market outcomes can be disproportionately higher even with minor increases in the rate of early detection and enforcement efficiency. For instance: When both predictive analytics and whistleblower reforms allow raising the probability of detection of material governance violations by even 10-15 percentage points, then the cost of non-compliance is likely to be higher to firms, and thus, the deterrence is improved. Being able to adjudicate more rapidly can reduce the time interval between violation and punishment which empirical literature has linked to increased complying and decreased recidivism. Greater transparency through a governance index would help investors to price governance risk more appropriately, which, in their turn, would shift capital to better-governed firms and would stimulate others to become better-governed. All these reforms in total can credibly minimize the rates of governance failure and their severity, increase compliance levels on the ground, and, most importantly, enhance investor confidence and stability of the market. Although it would be impractical to quantify this step with specific empirical modelling, comparative, and theoretical data point to the fact that cohesive legal and data-based reforms would allow incrementally enhancing the governance of SEBI.
Conclusion:
The paper has discussed the regulatory impact of SEBI on the promotion of corporate governance in India in three complementary perspectives, which include legal-institutional design, quantitative trends, and comparative practice. SEBI has increasingly broadened and deepened its mandate of governance under the LODR Regulations, the takeover rules, the insider trading rules, and thematic investments on related-party dealings, independent directors, and disclosure requirements. Quantitatively, the indicators are that the measures taken by SEBI have greatly increased formal compliance: compliance rates around governance issues have increased by about 63 per cent to approximately 89 per cent during the last decade: there is wider adherence to board independence norms, mandatory committees, and more disclosure frameworks. These benefits are, however, accompanied with structural and behavioral problems that persist. On the institutional level, delays in investigation and adjudication, capacity constraints and in a few cases, conflicts in jurisdiction with other regulators or ministries, do not enhance deterrence by dispersing accountability and slowing down the decision-making process. Substantively, there is also an alarming gap between what the governance norms are supposed to be and what the actual practice of governance is. The dominance of promoters, family-centered control systems and similar-party transactions, occasional corporate scandals despite the complete adherence to the formality, all these points to the fact that most companies look to governance as a compliance mechanism rather than a part of an ethical and managerial culture. Thus, SEBI will face twofold challenge. The former is normative and structural: to keep streamlining and defining its legal mandate on governance issues and guarantee that it goes hand in hand with company legislation, competition legislation, and industry rules. The second is functional: to apply its norms in a timely, consistent, transparent, and credible manner. To tackle these two problems, it will require reforms based on empirical foundations that would take advantage of both law and technology.
