Chandrashekhar Sathe, CEO of Kotak Mahindra Asset Management, said: ``In the West, activism by funds is emerging as the new style and there are several activist funds coming to the market''. Activist funds are passive in investment management but active in the pursuit of corporate governance. The reason for the big difference in regulations in the West and India could to a large extent be due to the ownership pattern in the country. Across the markets, institutional investors have emerged as one of the largest owners in companies. Hence they are in a position to substantially influence the corporate behaviour. On the contrary, public ownership in the form of small investors cannot effectively monitor corporate behaviour and performance.

Said Dr Jinesh Panchali, faculty at UTI Institute of Capital Markets: "In India insiders or corporates' ownership is observed to have been varying between 35 and 30 per cent. By international standards, this is quite a large proportion." However, he adds that a case for a more active institutional investor participation in corporate boards is in the interests of larger public ownership.

It has also been found that funds' active role in controlling and monitoring corporate governance of companies has had a beneficial effect. According to a Wahal and McConnell (200) study of over 2,500 US firms during 1988-1994, there is a positive relation between long-term investments/ expenditure and the fraction of shares owned by institutional investors, he pointed out.