NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance
An analyst wants to judge whether a promoter group is gradually losing confidence in a listed company. Which observation would be the most direct warning sign from a governance perspective?
A rising proportion of promoter shares pledged with lenders is the clearest warning sign. It suggests promoter-level financial stress or leverage, and if the pledge is invoked the forced sale can hurt the share price and control. Higher dividends, a new independent director and auditor rotation are healthy practices.
- AA steady increase in the dividend payout ratio over three years
- BA rising percentage of promoter shareholding that is pledged with lendersCorrect
- CAppointment of an additional independent woman director
- DRotation of the statutory auditor after the maximum permitted tenure
Explanation
A rising share of promoter holding pledged to lenders signals financial stress or aggressive leverage at promoter level, and invocation of the pledge can force sales of shares. The other options are neutral or positive governance practices.
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