Dual dynamics of ownership: family vs external shareholders’ impact on real earnings management

Family-owned firms dominate India’s corporate economy, representing more than 60% of listed companies and an even larger share of market capitalisation. Their concentrated equity positions give promoters strong strategic control, yet this same control can blur the boundary between family and firm, creating agency tensions that threaten reporting integrity (Duréndez and Madrid-Guijarro, 2018; Fama and Jensen, 1983; Jensen and Meckling, 1976; Shleifer and Vishny, 1997; Sundkvist and Stenheim, 2023). In a regulatory environment where investor-protection statutes are still maturing, the behaviour of family promoters becomes pivotal to the credibility of financial statements and, by extension, to capital-market efficiency.

When oversight is weak and performance pressure intensifies, managers often manipulate reported earnings. Although accrual-based manipulation attracts most regulatory attention, real-activity earnings management (hereafter, REM)—altering production volumes, discretionary spending or the timing of revenue recognition—can be harder to detect and more damaging to long-term value because it distorts strategic business decisions (Roychowdhury, 2006). Empirical evidence from closely held firms in East Asia shows that insider’s resort to REM when capital-market expectations rise (Attig et al., 2020), while studies in the Gulf Cooperation Council (GCC) reveal similar tendencies in environments dominated by state or family shareholders (Al-Duais et al., 2022). These findings underscore the importance of studying REM in India, where family control is persistent and institutional monitoring remains uneven.

Despite a growing body of Indian research on earnings management, most studies treat family ownership and external blockholding as separate phenomena. Highly leveraged family firms, for instance, appear to intensify REM to satisfy debt covenants (Avabruth and Padhi, 2023), whereas French and some other countries evidence suggests that family firms committed to corporate social responsibility exhibit superior earnings quality (Brahem et al., 2022; Rahman and Zheng, 2023). Yet the interaction between family promoters and non-family blockholders—and how the balance of their stake’s shapes REM—remains underexplored. Without an explicit metric that captures this balance, it is difficult to adjudicate between stewardship-theory predictions that view family owners as long-term guardians (Davis et al., 1997) and agency-theory concerns about entrenchment (Anderson and Reeb, 2003).

To address this gap, the present study introduces the Family Ownership to External Ownership Ratio (hereafter, FEOR), an indicator that quantifies the ownership equilibrium between promoters and non-family blockholders. Anchored in Stewardship Theory, this study posit that a higher FEOR aligns managerial incentives with firm longevity and reputation, thereby reducing the need for opportunistic REM. Using a panel of 12,290 firm-year observations from 2,188 listed Indian family firms between 2010 and 2021—each with at least 20% promoter shareholding—this study tests whether FEOR is negatively associated with three standard REM measures: abnormal discretionary expenditure cuts, overproduction and revenue-timing tactics. By integrating ownership structure with REM outcomes, the study offers regulators an easily computed red-flag metric and provides investors with an insight into how governance equilibria influence real business decisions.

The remainder of the paper proceeds as follows. Section 2 reviews the theoretical and empirical literature on ownership structure and earnings management and develops the hypothesis linking FEOR to REM. Section 3 elaborates the research gap and motivation; Section 4 details the data, variables and methodology; Section 5 presents results and robustness checks; Section 6 discusses conclusion and implications for policy and practice; and Section 7 narrates limitations and avenues for future inquiry.

Stewardship Theory provides the primary lens for this study, contending that family owners frequently behave as custodians of long-term firm value because their emotional and financial fortunes are deeply intertwined with the business (Davis et al., 1997). Such owners typically privilege continuity and reputation, thereby dampening incentives for opportunistic earnings manipulation (Anderson and Reeb, 2003). This stewardship perspective contrasts with classic agency theory, yet both frameworks acknowledge that ownership structure is central to corporate-governance outcomes (Le and Nguyen, 2023).

In family firms, governance is complicated by the simultaneous presence of family promoters and external blockholders (La Porta et al., 1999). Family shareholders often emphasise reputational capital, whereas non-family blockholders may prioritise short-term market performance, potentially heightening the propensity for REM (Ali et al., 2007). To capture this shifting balance of influence, this study introduces the FEOR—a metric that quantifies the relative stakes of promoters versus external blockholders. Prior work shows that higher family shareholding aligns managerial and owner interests, reducing opportunistic behaviour (Martinez Ferrero et al., 2016). Conversely, strong external stakes can create pressure to meet immediate benchmarks, encouraging REM (Ali et al., 2007; Shleifer and Vishny, 1997). By explicitly incorporating both ownership proportions, FEOR offers a lens on how governance structures shape financial-reporting behaviour.

Empirical evidence reinforces the importance of ownership composition. Tommasetti et al. (2020) document that older family businesses in Italy and Brazil deliver superior reporting quality, while Avabruth and Padhi (2023) find that heavily leveraged Indian family firms rely more on REM to satisfy debt covenants. Comparative studies reveal further insights: East Asian family-controlled firms favour REM when insider groups dominate monitoring (Attig et al., 2020), whereas Malaysian firms with higher family stakes exhibit lower REM (Al-Duais et al., 2022). The studies in India documented that REM remains widespread, yet empirical relationship between family and external ownership is mixed (Bansal, 2021; Marisetty and Moturi, 2023). Together, these findings suggest that the interaction of promoter and blockholder interests—not their absolute levels alone—may play a crucial role motivating or constraining earnings-management behaviour.

Governance research also highlights how family blockholders can temper managerial discretion. Al-Okaily et al. (2020) show that close auditor–client ties heighten manipulation risk in UK family firms, whereas Kumala and Siregar (2021) demonstrate that family ownership conditions the relationship between CSR disclosure and earnings management in Indonesia. External blockholders in India might add an extra layer of monitoring, yet their investment horizons and return expectations can equally motivate short-termism. Understanding how these dual forces coexist is therefore essential for robust analysis of REM.

By foregrounding Stewardship Theory, this study posits that committed family owners can counterbalance external pressure for short-term results, promoting financial transparency. FEOR operationalises this intuition by measuring the relative power distribution inside family firms. While previous studies have explored family or external ownership in isolation, few have examined their ratio as a determinant of earnings management. Incorporating FEOR into the analysis thus enriches the governance literature and provides a context-specific tool for emerging markets such as India, where promoter stakes and external blockholding are both substantial and strategically consequential.

Corporate-governance mechanisms beyond ownership—audit-committee vigilance, board independence and CSR initiatives—also shape earnings quality (Salehi et al., 2020; Kumala and Siregar, 2021). These levers typically operate alongside ownership structures rather than in isolation. By integrating Stewardship Theory with empirical insights on REM, the present study extends our understanding of how concentrated ownership, captured through FEOR, can deter or facilitate REM in Indian family-owned firms.

Stewardship Theory contends that family owners, whose wealth and identity are intertwined with the firm, prioritise continuity and reputation, thereby lowering incentives for opportunistic reporting (Davis et al., 1997; Anderson and Reeb, 2003). External blockholders, in contrast, often judge performance against short-term market benchmarks and can pressure managers to manipulate real activities to meet earnings targets (Ali et al., 2007). The coexistence of these owner groups creates a governance tension that is especially salient in Indian family firms, where promoter stakes are high yet outside blockholding is increasingly common.

A higher FEOR should mitigate REM through several channels. First, concentrated family control enhances private monitoring and reduces information asymmetry, discouraging managers from undertaking costly operational distortions. Second, family promoters’ desire to protect socioemotional wealth and trans-generational reputation raises the expected penalties of being caught manipulating production, discretionary spending or revenue timing (Tommasetti et al., 2020). Third, families’ longer investment horizon makes the short-run benefits of REM less attractive relative to its long-run costs. Finally, when family influence dominates, managers can rely on less disruptive accrual adjustments to satisfy performance goals, substituting away from REM (Avabruth and Padhi, 2023). Collectively, these mechanisms imply that as FEOR rises, the balance of power shifts towards owners who value sustainable earnings quality and away from investors who prioritise immediate results.

By operationalising ownership balance through FEOR, this study extends Stewardship Theory to a context where promoter dominance and external pressure coexist, offering a governance metric that links ownership structure directly to firms’ operating decisions.

Despite a substantial body of literature on family firms and earnings management, a notable gap remains regarding the interaction between family ownership and external blockholders in shaping REM practices, especially in Indian family-owned firms (Avabruth and Padhi, 2023; Brahem et al., 2022). These dual ownership pressures can significantly influence financial transparency and earnings management yet remain underexplored. This gap is particularly striking given the distinct governance context of Indian family firms, where familial control intertwines with blockholder influence to create unique managerial incentives.

This study addresses this gap by introducing the FEOR to capture the relative power of family ownership versus external blockholders. Unlike socioemotional wealth or board governance-focused approaches (Calabrò et al., 2022), FEOR specifically examines how concentrated family ownership intersects with external shareholder influence in the Indian context. Prior research in other emerging markets (e.g. Kadhim, 2023) underscores the need for contextualised analysis of corporate governance mechanisms. However, few studies have leveraged the family ownership related metrics to understand REM practices—particularly through abnormal operating cash flows, discretionary spending and production costs.

By highlighting this unique conceptual framework, the present research provides theoretical and practical insights into how family-owned firms navigate short-term market demands while sustaining long-term reputational goals. In doing so, the study expands corporate governance literature and offers insightful recommendations for policymakers aiming to curtail opportunistic earnings manipulation. By examining the FEOR–REM relationship, this work illuminates new pathways for strengthening oversight in family-dominated environments. This focus is increasingly relevant amid the continued growth of family firms in emerging economies.

This study utilises firm-year observations from 2010 to 2021 for 2,188 family-owned firms in India, resulting in 12,290 firm-years of data drawn from the Centre for Monitoring Indian Economy (CMIE) databases. The selection of this period reflects the availability of consistent data before the heightened pandemic effects in 2022 and 2023. While the COVID-19 pandemic began affecting the economy in March 2021, this cutoff minimises potential distortions on firm-level financial reporting. Such an approach ensures a relatively stable environment for analysing the relationship between ownership structures and REM.

The initial sample included 5,123 listed companies from the CMIE Prowess database widely used in Indian academic research. Companies with at least 20% promoter ownership were retained to ensure the focus on family-owned firms, yielding 2,342 firms. Next, firms where the CEO or Managing Director was not part of the promoter group were excluded, resulting in a final sample of 2,188 companies. Financial firms were also removed to avoid regulatory complexities unique to that sector. Furthermore, outliers were winsorised at the top and bottom 1% to mitigate the influence of extreme values on the regression analysis. This filtering process captures the core characteristics of Indian family-owned firms while reducing data anomalies.

Consistent with prior research, family ownership in this study is defined as 20% or more shareholding by the promoters, who also occupy top managerial roles (CEO or Managing Director). This threshold ensures promoters exercise meaningful strategic control, aligning ownership with decision-making authority (Shleifer and Vishny, 1997).

Following Roychowdhury (2006) and subsequent studies (Brown et al., 2015; Kim et al., 2012; McGuire et al., 2012), three forms of REM are considered: abnormal production costs, abnormal discretionary expenditures and abnormal operating cash flows. An aggregate measure (REMSUM) is calculated:

where REMPROD refers to overproduction, REMDISX captures discretionary spending cuts and REMCFO indicates sales-driven manipulations. In this estimation, REMDISX and REMCFO are multiplied by minus one to make the values of these variables intuitively appealing (Zang, 2012), ensuring higher REMSUM values signify greater overall REM (Zang, 2012).

The Family Ownership to External Ownership Ratio (FEOR) is measured as:

FEOR serves as a governance metric in this study. By comparing the relative shareholding of promoters to that of external blockholders, FEOR captures the balance of ownership power in each family firm.

To examine the relationship between REM and FEOR, the following regression model is used:

1. REMSUM is the dependent variable indicating total REM.

2. FEOR measures the comparative shareholding of family owners and external blockholders.

3. LEV (Leverage) captures the firm’s debt-to-equity ratio (Avabruth and Padhi, 2023).

4. MBV (Market-to-Book Value) measures growth opportunities (Bzeouich et al., 2024).

5. ROA measures profitability (Dechow et al., 1995).

6. SIZE is the firm’s size, typically measured by the natural log of total assets.

7. ACMEET (Audit Committee Meetings) and ACSIZE (Audit Committee Size) reflect governance attributes (Al-Absy et al., 2019).

8. BOARD_IND (Board Independence) and BOARD_SIZE are proxies for board structure (Bansal, 2021).

9. BIG5 indicates audit quality (Martinez Ferrero et al., 2016).

10. DAC captures discretionary accruals (Zang, 2012).

Table 1 presents the descriptive statistics for the variables used in this study. The mean REMSUM of −0.269, with a standard deviation of 1.968, suggests a wide dispersion in REM activities among the sample firms. The measures of REM, i.e. REMCFO, REMDISX and REMEXCESSPROD, have negative mean values. Regarding the control variables, the average leverage ratio (LEV) of 1.046 signifies moderate use of debt. In contrast, the market-to-book ratio (MBV) 2.315 implies that firms’ market valuations generally exceed their book values. Audit committee characteristics (ACMEET and ACSIZE) and BOARD_SIZE meet regulatory norms, pointing to robust governance processes. The average FEOR of 16.428 highlights the dominance of family and promoter shareholding within the sample.

Table 2 displays the Pearson correlation coefficients. LEV is positively and significantly associated with REMSUM, suggesting that firms with higher leverage tend to undertake more REM. In contrast, MBV exhibits a negative and significant relationship with REMSUM, indicating that firms with higher market valuations engage in less REM. BIG5 audits correspond to lower REM, while firms using discretionary accruals appear to de-emphasize REM. Importantly, the correlation matrix also shows that FEOR is negatively and significantly related to REMSUM, implying that increases in family ownership relative to external blockholders coincide with reduced REM. This finding is consistent with Stewardship Theory and provides initial support for the view that concentrated family ownership curbs opportunistic financial behaviour.

In line with the univariate findings from Section 5.1, Table 3 examines the relationship between FEOR and REMSUM in Indian family firms. Consistent with Avabruth and Padhi (2023), the results reveal a significant negative coefficient for FEOR (−0.016, p < 0.05), indicating that greater family ownership relative to external blockholders is associated with lower REM. This aligns with Stewardship Theory (Davis et al., 1997), as family owners value long-term sustainability, reputation and reduced external pressure over short-term gains (Shleifer and Vishny, 1997). In contrast, higher external blockholder presence may increase demands for immediate returns, supporting La Porta et al. (1999) on potential agency conflicts introduced by non-family shareholders.

These findings are also consistent with those of Tommasetti et al. (2020), who argue that family-centric structures can enhance checks and balances, improving financial reporting quality. In other emerging markets, such as Malaysia and China, family-focused ownership has likewise curtailed earnings manipulation, reinforcing the universal relevance of stewardship mechanisms beyond the Indian context. Several control variables, including LEV, MBV, ROA, SIZE and DAC, exhibit significant relationships with REMSUM, supporting prior literature. For instance, increased leverage (LEV) and profitability (ROA) associates with higher REM (Avabruth and Padhi, 2023). In contrast, larger firms (SIZE) and those with higher market-to-book ratios (MBV) show lower REM, paralleling findings from La Rosa et al. (2020) on European family firms. Additionally, the negative coefficient of DAC supports the findings of Al-Absy et al. (2019) that rising discretionary accruals often substitute for REM in Malaysian firms.

Overall, these regression results supports the notion that family-dominated governance—grounded in Stewardship Theory—exerts a moderating influence on opportunistic financial behaviour, highlighting the pivotal role of ownership structures in shaping earnings management outcomes.

Following the baseline results in Section 5.2, this study further tests the robustness of findings by examining the three key components of REM: augmenting sales, overproduction and reducing discretionary expenses (Roychowdhury, 2006; Kim et al., 2012; McGuire et al., 2012; Brown et al., 2015). These disaggregated analyses offer insights into how family ownership, as captured by FEOR, influences specific REM strategies, complementing the overall REMSUM measurement. Roychowdhury’s (2006) approach underpins the estimation methods used here. Sales and assets are pivotal in estimating operating cash flows, production costs and discretionary expenditures, making them central to REM detection. Following Li (2019), missing values for the panel distribution of actual discretionary expenses are assigned zero when determining expected discretionary spending, maximizing the available data. The three components REM are estimated introducing 2-digit NIC industry-level fixed effects for each year from 2011 to 2021, omitting any industry-year combination with fewer than 15 observations.

Discretionary spending cuts represent a form of REM, as firms artificially boost reported income by curbing expenditures on advertising, research and development and general administrative costs. In line with Roychowdhury (2006), abnormal or unexpected discretionary spending is derived by regressing actual spending on sales and changes in sales, all scaled by prior-period total assets. Higher abnormal discretionary expenses imply more earnings manipulation once multiplied by −1 (Zang, 2012).

This relationship is expressed in Equation (4).

Equation (4) represents the estimation of discretionary spending, where all variables are scaled by the total assets from the previous period. Any absent data within the panel distribution of the actual discretionary expenses is assigned a zero value when determining the expected discretionary expenses. This adjustment was made to optimise the number of data points in the sample, as suggested by Li (2019). Equation (4) is estimated for every 2-digit NIC industry category and each year from 2011 to 2021, during which if any industry-year combination yielded fewer than 15 data points, such combinations were omitted. Once the abnormal discretionary expenses are estimated as per equation (4), these values are multiplied by a negative value, as proposed by Zang (2012). Larger values of abnormal discretionary spending signify a greater extent of earnings management to inflate reported earnings and vice versa.

Table 4 presents the relationship between FEOR and REMDISX (reduced discretionary spending). Consistent with Avabruth and Padhi (2023) and Tommasetti et al. (2020), the coefficient for FEOR is significantly negative (−0.025, p < 0.01), reinforcing the findings from Section 5.2. This significant inverse relationship aligns with Stewardship Theory (Davis et al., 1997), which posits that long-term orientation, reputation concerns and lower external pressure discourage manipulative reporting in family-led firms. In other emerging markets, family-centric structures similarly limit earnings manipulation, indicating a broader relevance of stewardship mechanisms outside India. Overall, increasing family ownership reduces the likelihood of cutting discretionary expenditures to inflate earnings, underscoring family firms’ commitment to more transparent financial practices.

Building upon the baseline results in Section 5.2 and the robustness analyses in Section 5.3, this subsection delves into how FEOR influences REM through overproduction. Overproduction is a strategy wherein firms deliberately elevate production volumes to spread fixed production costs over a larger output, thereby reducing the cost per unit and artificially inflating reported earnings. As described in Equation (5), production cost is determined by summing the cost of goods sold with the change in inventory and then scaling these figures by the firm’s prior-period total assets.

In Equation (5), PROD_it is the production cost, which is the sum of the cost of goods sold and the change in inventory. The term ASSETS_it-1 denotes the firm’s total assets in the previous year. SALES_it represents the firm’s net sales, whereas DELTA_SALES_it signifies the variation in net sales. Each variable in this equation is scaled by the assets from the preceding year. Equation (5) is estimated for every 2-digit NIC industry category and each year from 2011 to 2021.

Table 5 presents the regression outcomes that assess the effect of FEOR on the component of REM identified as REMEXCESSPROD (overproduction). The results indicate a significant negative coefficient (−0.021, p = 0.010), meaning that a higher FEOR is associated with lower levels of overproduction. This result strongly supports the contention, rooted in Stewardship Theory (Davis et al., 1997), that family firms, when guided by a long-term orientation, inherently adopt more conservative production practices to ensure enduring value creation and maintain financial transparency. The intrinsic long-term focus of family ownership heightened reputation concerns and diminished external pressures appear to empower managers to resist engaging in opportunistic behaviour. Unlike previous sections broadly discussing these mechanisms, they are applied specifically to production’s operational decisions. Moreover, comparative evidence from other emerging markets supports these findings, indicating that family-centric governance structures tend to curtail earnings manipulation through overproduction across various institutional contexts. Bridging from the earlier robustness analysis, these extended findings enrich our understanding of how family control influences distinct facets of REM. The persistent negative relationship between FEOR and REMEXCESSPROD underscores the critical role of long-term, stewardship-based decision-making in family firms, reaffirming that a higher proportion of family ownership is instrumental in mitigating practices that inflate earnings via overproduction.

Building on the results from the earlier components of REM (Sections 5.3.1 and 5.3.2), this section examines the relationship between FEOR and REMCFO, which captures earnings management through the augmentation of sales revenue. Firms employing this method typically manipulate the timing or recognition of revenue to elevate reported financial performance artificially. As outlined in Equation (6), operating cash flows (CFO) are modelled as a linear function of sales and changes in sales, scaled by prior-period total assets (Roychowdhury, 2006; Gunny, 2010).

In Equation (6), the CFO represents the operating cash flow of a firm. The term A_it−1 denotes the firm’s total assets in the previous year. SALES stands for the firm’s net sales, while DELTA_SALES signifies the variation in net sales compared to the previous year’s sales. Each variable in this equation is scaled by the assets from the preceding year. Once abnormal operating cash flows are estimated, they are multiplied by a negative factor (−1). This adjustment ensures that higher values of abnormal operating cash flows indicate a greater extent of REM, and lower values suggest the opposite, as posited by Badertscher (2011).

The regression results presented in Table 6 show a positive but statistically insignificant coefficient for FEOR (0.010, p = 0.205). This indicates that family ownership relative to external blockholders does not significantly influence earnings management through sales augmentation. In contrast to the findings for other REM components, such as discretionary spending (5.3.1) and overproduction (5.3.2), FEOR does not exhibit a significant influencing variable for this aspect of REM. While the lack of significance suggests that family ownership may have less control over revenue recognition practices, specific firm characteristics significantly influence REMCFO. For example, the market-to-book ratio (MBV) demonstrates a significant negative relationship (−0.033, p = 0.002), indicating that firms with higher market valuations are less likely to engage in sales-related earnings management. Similarly, return on assets (ROA) and firm size (SIZE) are negatively associated with REMCFO, with coefficients of −0.035 (p = 0.001) and −0.032 (p = 0.013), respectively. These findings align with the broader literature, which suggests that larger, more profitable firms and those with higher growth prospects tend to exhibit stronger governance mechanisms that deter earnings management practices.

Unlike the significant findings for other REM components, the lack of significance for FEOR in the context of sales augmentation highlights its differential role across various earnings management practices. This suggests that family ownership’s influence is more pronounced in areas like discretionary spending and production-related activities, where operational control plays a larger role, than in revenue recognition practices, which external factors or industry-specific norms may influence.

This study provides useful insights into the relationship between ownership structures and REM in Indian family-owned firms, introducing FEOR as a governance metric. The findings highlight that family ownership significantly curbs opportunistic REM practices, aligning with Stewardship Theory (Davis et al., 1997), underscoring the role of family firms in fostering long-term sustainability, transparency and ethical financial practices. This study emphasises the critical role of internal governance mechanisms in shaping financial reporting behaviours, demonstrating how family-centric control reduces earnings management through mechanisms like reduced discretionary spending and restrained overproduction.

Focusing on Stewardship Theory, this study extends prior research by highlighting the intrinsic value of family ownership in mitigating REM. It contributes to the ongoing debate on governance in emerging markets by validating the FEOR as a measure of governance dynamics in family firms. In contrast to generalised ownership models, FEOR provides an insightful perspective by capturing the interplay between family ownership and external blockholders, demonstrating how this balance influences earnings management behaviours. This research offers a framework for understanding how family ownership fosters a culture of accountability and commitment to long-term organisational goals, even in environments with weaker institutional frameworks.

From a practical standpoint, these findings hold significant implications for policymakers and practitioners. Policymakers can adopt the FEOR metric to design governance policies tailored to family firms, ensuring these firms prioritise transparency and reduce REM practices. For instance, mandatory governance disclosures and regulatory checks on external blockholders’ influence could mitigate short-term financial pressures and enhance the integrity of financial reporting. On the other hand, family firms can leverage FEOR to assess ownership dynamics and reinforce governance mechanisms prioritizing long-term value over short-term gains. Implementing internal reporting policies, strengthening audit committee independence and ensuring consistent oversight of operational decisions can further mitigate earnings management risks.

The focus on Indian family-owned firms may restrict the generalisability of findings to markets with different regulatory and cultural frameworks. Future research could address this limitation by conducting comparative studies across regions, such as the GCC or East Asia, to explore how variations in institutional settings are associated with the FEOR–REM relationship. Furthermore, while the study relies on quantitative methods, qualitative approaches such as interviews and case studies could capture the dynamics of family governance and its influence on earnings management. Mixed-method studies incorporating firm-specific narratives could offer richer insights into the dual role of family ownership in curbing opportunistic behaviours while maintaining strategic flexibility.

This study highlights the dual role of family ownership in fostering transparency and addressing external pressures, offering a balanced governance framework for family-owned firms. By introducing FEOR as a governance tool, this research equips policymakers, practitioners and researchers with actionable insights to enhance financial reporting quality and sustainability in family-controlled entities. The findings emphasise the importance of leveraging family oversight while addressing inherent limitations, ensuring a balanced and robust governance structure in emerging markets.