A Case study on Understanding how ICICI Bank – Videocon Loan Deal was a Corporate Governance Failure

Abstract

Purpose

The purpose of this paper is to understand the Corporate Governance failure that began with the ICICI Bank issuing credit to Videocon Group inspite of serious conflict of interest issues. This led to a series of investigations and arrests by the Central Bureau of Investigation and a spectacular fall from grace for Chanda Kochhar, one of the leading women in corporate India. In this case study we will also see how lapses in corporate governance can have an impact on the trust worthiness of the firm.

Design/methodology/approach

This case study research aims to understand more about how the ICICI Bank deal with Videocon was a massive failure of Corporate Governance and the bank's internal processes for credit approval. It will also try understand how this can also impact the share value and market capital of the firm. Data will be collected from publically available news reports, articles and blogs. To study the impact on the market, data will be used from BSE website.

Findings

 The discussion of the articles and reports will give us an understanding of how the Bank could have avoided the issue by red flagging many points including CEO’s role in the deal and dealt with the outbreak of the deal better and therefore by studying the share price and market capital of ICICI Bank from March 2016 to January 2019 obtained from Bombay Stock Exchange (BSE) we will see how the whole deal was a corporate governance failure and how markets and shareholders reacted to various different scenarios of the investigation.

Research limitations/implications

The study is limited to understanding what led to a loan deal becoming a corporate governance issue with focus only on ICICI Bank.

Practical implications

 The analysis of the deal and the players involved can help firms in future to improve their credit approval and corporate governance policies.

Social implications

Findings of the case study will help potential common investors and current shareholders consider corporate governance issues seriously before investing their time and money in the firm.

Originality/value

This study will be highly valuable for professionals, policy makers, investors, bankers and researchers in the field who are looking to understand how important corporate governance and its impact to a firm.