The methodology of the study consists of following steps namely: construction of theory or model; data collection; estimation and testing; and interpretation of findings to generate conclusions and relate them to the literature and theory. It is useful to explain, as part of the methodology, the testing ground chosen for the empirical chapters, i.e. mainly India. The Indian emerging market has been undergoing economic reforms since 1991, prior to which it was characterised by high controls and extensive public ownership. Prior to reforms a licensing system required firms to obtain clearances for many routine operations. Clearances were typically determined not on economic or social basis but by the relative lobbying power of firms. Indeed, this may explain the large size of the Indian market in terms of number of listed firms while at the same time majority of Indian companies are relatively small (Green, Murinde and Suppakitjarak, 2001). Similarly, the foreign trade regime prior to reforms was characterised by high protectionism from import competition and restrictions on foreign ownership of Indian companies. Likewise the government was heavily involved with the workings of the financial systems. High reserve requirements were stipulated, interest rates were imposed, and credit was directed to priority sectors giving rise to manipulation and inefficiencies. Furthermore, supervision and financial discipline were slack, and equity markets suffered from lack of transparency and poor investor protection, while the large public sector was similarly inefficient. In 1991 India suffered a financial crisis which was followed by the initiation of economic reforms. For example, capital market reforms included the establishment of the Securities and Exchange Board of India (SEBI) in 1988, which was given statutory powers in 1992. SEBI was charged with

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