The Research Dialogue

Author(s): Prof. (Dr.) Binod Pratap Singh & Dr. Smriti Shishir

DOI: https://doi.org/10.64880/theresearchdialogue.v4i3.14

Abstract:

              India’s start-up ecosystem has emerged as one of the most vibrant in the world, with more than a hundred unicorns spanning across several sectors, including fintech, edtech, e-commerce and SaaS. This exponential rise, while depicting unprecedented innovation and well-thought-out policies, including Startup India and Digital India, has also unveiled alarming concerns about corporate governance. In contrast to listed companies, a considerable proportion of Indian start-ups exhibit founder concentration, which is accompanied by low levels of independent board monitoring and underdeveloped internal audit mechanisms. These governance gaps serve as fertile ground for various forms of earnings manipulation, ranging from manipulating accruals and real activity to inflating operating statistics like user numbers or gross merchandise value.

Based on secondary evidence, academic research, and official data, the paper develops conceptual arguments supported by empirical case examples for the long-run decline in financial system efficiency and effectiveness, as well as a system weakened by structural problems and investor activism. Results emphasise that demand and valuation pressures during fundraising, IP stakes, and competitive positioning provide founders with strong economic incentives to misreport their performance. Industry-specific trends, including inflated enrolment rates in the edtech sector and overstated lending revenues in the fintech sector, highlight how weak corporate governance structures can create significant challenges. The study identifies three major limitations in the existing literature: a lack of empirical attention to start-ups, insufficient consideration of investor-driven reporting pressures, and an underestimation of sectoral vulnerabilities inherent in India’s digital economy. These need to be addressed with the early inclusion of independent directors, more stringent disclosure standards, in-house audit capabilities, and regulator-led monitoring post-IPO threshold.

Finally, the paper suggests that corporate governance should be developed in response to entrepreneur station demand. Sustainable scaling requires transparency, accountability, and a model of governance that minimises manipulation of earnings yet continues to foster creative dynamism. The key topics include corporate governance, start-ups, earnings management, India, financial reporting, and entrepreneurial ecosystems.

Keywords: Ecosystem, e-commerce, Corporate Governance.