Consider India. Foreign buyers are pushing stock prices toward all-time highs, drawing a new wave of Indian companies to the public markets. Some 50 applications for new listings on India's stock markets worth about $6.3 billion are pending, says Firstcall India Equity Advisors.

Flash back a year and markets were reeling from a massive fraud at Satyam Computer Services as investors reevaluated India on the basis of governance risk. Does the market's return mean India has its governance problems sorted out? Hardly.

A year after the Satyam scandal erupted, investor protections remain weak, a recent study by the Asian Corporate Governance Association, or ACGA, concluded. In particular this creates problems for minority investors in the family-owned businesses that are so common in India.

For example, controlling shareholders can strike deals even when conflicts of interest are readily apparent. By comparison, in Hong Kong and Singapore, companies making sizable deals of this nature need the approval of independent investors.

Another complaint? The practice of allowing the controlling family to buy stock at below-market prices through the use of preferential warrants. Ostensibly to raise funds, the move nevertheless erodes minority ownership.

Write to  Harsh Joshi at harsh.joshi@dowjones.com  

Source: The Wall Street Journal By Harsh Joshi India's Shaky Governance