Indian corporate governance

Virtue is its own reward. The Indian market is down 13 per cent in the past week in dollar terms, largely because investor confidence in the quality of corporate information on the subcontinent has collapsed in the wake of the accounting fraud at Satyam, the country’s fourth-largest IT services firm. To say that the Indian market faces a quality of earnings issue is an understatement. After all, corporate profits have grown almost six-fold between 2003 and 2008, according to Morgan Stanley, and there is now justifiable concern about the extent to which this exceptional performance might result from artful book-keeping, particularly at some of the large family-controlled groups that dominate the Sensex index of 30 leading shares.