The Effects of Ownership Concentration on Performance of Pakistani Listed Companies

Abstract

This paper analyzes the effects of ownership concentration on investment performance in a large sample of Pakistani publicly-listed companies from 1997 to 2007. Special attention is directed to statistical methods from the field of panel-data econometrics, which are able to deal with endogeneity problems and with structural reverse causality. The preferred estimator that is based on firm fixed effects insinuates that the voting rights of ultimate shareholders affect Tobin's q unambiguously negatively, whereas the squared voting rights affect it unambiguously positively. This implies a U-curved relationship between Tobin's q and voting rights concentration with a turning point at 45%. More than 75% of the companies fall in the upward sloping part of the curve. While positive incentive effects are at work in Pakistan, financial market development is retarded by the reluctance of minority shareholders facing dominant shareholders to hold small stakes in listed companies. Consistently, institutional shareholders do not yet provide a positive monitoring role in Pakistan.JEL Classification Numbers: L2, G3, DOI: http://dx.doi.org/10.12955/cbup.v4.764

Do ownership and board characteristics enhance firm performance? A corporate governance perspective

“…Firm size is also significantly positively related to a firm performance at the level of 5%. These results are similar to Afgan et al (2016) and demonstrated that a larger firm discloses the more information clearly and enjoys the benefits of economies of scale. Firm size also has a positive impact on firm performance and mostly used by different studies (Blasco & Carrizosa, 2007; Boone, Field, Karpoff, & Raheja, 2007; Musallam, Fauzi, & Nagu, 2019; Saidat, Silva, & Seaman, 2019).…”

“…The literature is available in many ways like as determining the interlinkage with of ownership characteristics, board composition and firm performance (Abdallah & Ismail, 2017; Arosa, Iturralde, & Maseda, 2010; Bauwhede, 2009; Belkhir, 2009; Bhagat & Bolton, 2008; Chiang & Lin, 2007; Górriz & Fumás, 1996; Kapopoulos & Lazaretou, 2007; Lam & Lee, 2012; Lefort & Urzúa, 2008; Love & Klapper, 2002; Maury, 2006; Nicholson & Kiel, 2007; Phung & Mishra, 2016; Singh & Gaur, 2009; Tam & Tan, 2007; Yeh, 2019). In the Pakistan context, different studies are available such as (Afgan, Gugler, & Kunst, 2016; Ahmed Sheikh, Wang, & Khan, 2013; Javid & Iqbal, 2008; Shah, Butt, & Saeed, 2011; Yasser & Mamun, 2015; Yasser, Mamun, & Rodrigs, 2017). It is clearly stated that there is a need to examine it with a new market measure.…”

“…Extension to ownership and board characteristics, the control variables are firm size (Alabdullah, 2018) and industry level (Alabdullah, 2018; Ho & Wong, 2001; Mehdi, Sahut, & Teulon, 2017). Firm size is used to control variable by multiple studies (Afgan et al, 2016; Connelly, Limpaphayom, & Nagarajan, 2012; Gonenc & Zengin‐Karaibrahimoglu, 2019; Javid & Iqbal, 2008) and it has a significant impact on the dependent variable (Brooks, 2019). But firm size is used as a control variable with market share by (Alabdullah, Yahya, & Ramayah, 2014; Ferrier, Smith, & Grimm, 1999) as they argued that higher firms market share may not contrast with lower firms market share.…”

“…. In the Pakistan context, different studies are available such as (Afgan, Gugler, & Kunst, 2016;Ahmed Sheikh, Wang, & Khan, 2013;Javid & Iqbal, 2008;Shah, Butt, & Saeed, 2011;Yasser & Mamun, 2015;Yasser, Mamun, & Rodrigs, 2017). It is clearly stated that there is a need to examine it with a new market measure.…”

Internal Corporate Governance and Financial Performance Nexus; a Case of Banks of Pakistan

“…The ownership held by big financial organizations, pension funds or endowments is called as institutional ownership. In Pakistan institutional ownership do not have a positive observing role [24]. While on the other hand, some studies have explored that the percentage of both institutional stock ownership and institutional stockholders have noteworthy association with firm's operating cash flow returns [25].…”