Stud ies show positive, negative as well as both positive and negative relationship at differin g levels of equity holdings by m anagers. The purpose of the study is to investigate the relationship between firms ownership structures, corporate governance pratices and firm performance. Control variables that have been used in the literatures include firm size, capital structure and growth opportunity. How ownership structure affects capital structure and firm. However, empirical results have failed to provide consistent evidence to prove whether the type of ownership does significant affect firm performance. I focus on the role of two main dimensions of the ownership. Therefore, type ii agency costs are likely to be more important for firms endowed with a cms. Lastly, we include some control variables to control for other potential influences on ownership structure and enterprise performance. This study is conducted to analyze the significant relationship of ownership structure with firm performance in nonfinancial companies listed at karachi stock exchange during the period 2008 to 2010. Capital structure, equity ownership and firm performance dimitris margaritis 1 and maria psillaki 2 revised april 2009 1 corresponding author department of finance, faculty of business, aut, private bag 92006, auckland 1020, new zealand.
Ownership structure, corporate diversification, and firm. The dominant paradigm of corporate governance is based on the argument of berle and means 1932 that separation of ownership and control affects the reported level of income of firms, either positively or negatively. Evaluating the effect of ownership structure on firm. Ownership structure and corporate governance among. Theory tells us that managerial ownership of shares in a firm generates two conflicting effects on management behaviour, i. The effect of ownership structure on corporate performance of. More specifically, it investigates the effect of cash flow rights, control rights and cash flow rights leverage on firm performance. Ownership structure and corporate performance ying li previous studies of ownership structure mainly focus on the relationship between insider ownership and corporate performance. To tests these hypotheses this paper u, ses a sample of listed. The impact of ownership structure on firm performance. I explore the determinants of ownership concentration and the relationship between ownership structure and firm value in the context of a.
We examine the effect of ownership structure on firm performance, for firms listed on vietnamese stock exchanges, using 2744 firmyear observations over the. Corporate governance cg and capital structure cs plays a big role in the maximization of shareholders wealth and good cg is important in increasing the market value of a firm while higher financial leverage decreases a firm value by increasing bankruptcy risk. No study so far has tackled such an important issue in saudi arabia. The main results show that the higher the proportion of independent directors, the smaller the board size, together with a twotier board system and no chief executive officer duality, the stronger the firm s performance. Corporate finance introduction capital structure is a mix of debt and equity capital maintained by a firm. Pdf corporate ownership structure and firm performance. This study investigates the effect of the corporate governance on firm performance of the jordanian industrial and services companies during the period 2000 to 2010. Theoretical and empirical research on the relationship between ownership structure and firm performance was originally motivated by the separation of ownership from control berle and means, 1932 and followed by agency theory jensen and meckling, 1976.
In doing so, we not only allow for the possible nonlinearity in these relationships, but also. Corporate governance is a set of procedures and principals which control the. The effect of ownership structure on firm performance in. Capital structure, equity ownership and firm performance. The paper works with a sample of 304 firms from different sectors of the economy, and from a representative group of arab countries egypt, jordan, oman and tunisia where related data could be gathered. The relationship between the various aspects of ownership structure namely ownership concentration. The impact of ownership structure on the financial. Ownership structures are of major importance in corporate governance because they affect the incentives of managers and thereby the efficiency of the firm. Pdf impact of ownership structure on firm performance. The results show that the inside ownership is positively related to the stock returns. This study primarily employs the agency theory to investigate the relationship between corporate governance and firm performance. Corporate ownership structure and firm performance ipedr.
Agency theory, executive compensation structure, and firm performance jensen and meckling 1976 argue that ownership structure, executive com pensation structure, and board composition are determined by each other and by the nature of a firms business e. With respect to ownership structure, blockholders ownership, institutional ownership. This disclosure raises an important research question on the effectiveness of debt structure in enhancing performance of quoted firms in nigeria. The effect of ownership structure on firm performance in malaysia kamarun nisham taufilmohd, rohani md rus, sami r. Pdf ownership structure, corporate governance and firm.
Evidence from panel data of south korea sanghoon lee university of utah, department of economics abstract the study seeks to examine the effect of equity ownership structure on firm financial performance in south korea. The study examines the effect of ownership structure on firm performance. The results do not show any significant relationship between dual ceo structure and firm performance. The major objective of the shareholders of company is to maximise. Ownership structure is represented by managerial ownership and concentrated ownership. However, harjoto and jo 2009 found that ceochair duality positively effects firm performance at early stage of the firm. When studying ownership structure and corporate governance issues. They suggest that ownership structures differ across firms because of differences in the circumstances facing firms, particularly in regard to scale of economies, regulations and the environment stability in which they operate. In addition, the impact of ownership structure on firm performance. We distinguish between family firms, firms controlled by partnerships of. These ratios are explained more in depth in chapter 3. Executive compensation structure, ownership, and firm performance hamid mehran wallace e. Harcourt, brace and world implies that diffuse ownership adversely affects firm performance.
Ownership structure, corporate diversification, and firm performance. Pdf the study examines the effect of ownership structure on firm performance. The research is based on publicly traded firms listed on the stockholm stock exchange omx30, during the time period 20062011. Ownership structure, board composition and investment. Ownership structure and firm performance wiley online library. In the case of thailand, wiwattanakantung 2000 examines the relationship between managerial shareholders and firm performance in 1996. The effect of corporate governance on firm performance in. Capital structure is also referred as financial structure of a firm. Ownership structure topic is in the heart of corporate governance.
Musallam college of business, universiti utara malaysia, kedah, 06010, malaysia abstract this paper aims to investigate and analyze the effect of ownership by different groups of investors on the. This paper explores possible relationships between ownership structure and corporate governance, providing evidence that ownership structures may affect firms performance by inflicting agency costs. For both the effect of total ownership concentration on firm performance and the effect of insider ownership concentration on firm performance, two main arguments arise from previous literature. Ownership structure, firm performance, and corporate governance. We test this hypothesis by assessing the impact of the structure. We distinguish between family firms, firms controlled by partnerships of individuals, concern controlled firms, and firms where blockholders have less than 50% of the vote. Bhabra 2007 finds a significant nonlinear relationship between ownership.
A simultaneous equation model is estimated in which ownership structure is the dependent variable in one of the two equations and firm performance is the dependent variable in the second equation. Anderson anderson is from the kogod school of business at american university, and reeb is from culverhouse college of commerce at the university of alabama. Or does firms performance affect ownership structure. Evidence from selected arab countries abstract the paper works with a sample of 304 firms from different sectors of the economy, and from a representative group of arab countries egypt, jordan, oman and tunisia where related data could be gathered. Specifically, this study narrows the ownership structures categories into. We test this hypothesis by assessing the impact of the structure of ownership on corporate performance, measured by profitability, using data for 175 greek listed.
This paper tries to investigate whether there is strong evidence to support the notion that variations across firms in observed ownership structures result in systematic variations in observed firm performance. The effect of ownership structure on firm performance has been the subject of research in numerous studies. A study of listed firms in vietnam thesis submitted to the school of business of the university of western sydney in fulfilment of the requirements for the degree of doctor of business administration duc nam phung march 2015. Nigeria, using a sample of thirty listed companies. The purpose of this paper is to fill in this gap of the literature and examine how ownership structure may affect capital structure and firm performance. The aim of this thesis is to investigate the relation between ownership structure and firm performance. This paper aims to compare the effect of ownership on firm performances in the 1997 and 2008 financial crises. Corporate ownership structure and firm performance. In section 2 theoretical and empirical issues are discussed. The significant effect only can be seen in concentrated firm under during crisis and post crisis periods and for foreign ownership firms in post crisis period.
Executive compensation structure, ownership, and firm. By means of selforganising maps, in particular kohonen maps, we highlight three main results. This paper examines the relationship between firms ownership structure and financial performance in. The empirical work analyzes data on 280 israeli firms and employs the technique. Measures of firm performance the literature employs a number of different measures of firm performance to test agency cost hypotheses. The remainder of the paper is organized as follows. The effect of ownership structure on corporate performance of listed. Pdf this study implies that diffuse ownership structure negatively affects firm performance.
How the ownership structure affects firms operating and stock returns performance. The literature on ownership structure and firm performance in poland is very tight. First, the 2008 financial crisis happened quickly, so it was endogenous for firms. We distinguish between family firms, firms controlled by partnerships of individuals. Ownership structure, firm performance, crisis period. The trading and services firms are not affected by ownership structure under pre crisis period. The berlemeans thesis 1932 implies that diffuse ownership adversely affects firm performance. A number of studies have sought to evaluate these effects empirically.
Our study based on empirical evidence found that the. Carroll school of management, boston college, chestnut hill, ma 021673808, usa received october 1991. The objective of the paper is to survey the theoretical basis for and empirical evidences on the impact of ownership structure on firm performance. Corporate governance cg and capital structure cs plays a big role in the maximization of shareholders wealth and good cg is important in increasing the market value of a firm while higher financial leverage decreases a firm value by increasing bankruptcy risk sheifer and vishny, 1997. Ownership structure and firm performance university of twente. Previous research investigating the link between ownership structure and firm value or performance has yielded mixed results. By examining a comprehensive panel of firms listed on the stockholm stock exchange during 19992005 the paper also adds some methodological insights to the empirical literature. Article pdf available december 2016 with 416 reads. Corporate ownership structure and innovation in canadian. Managerial shareholding is classified into three levels 25% 50%, 50%75% and beyond 75%.
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