The ownership structure effect on firm performance in South Africa

Abstract

This research investigates the effect of corporate governance through ownership structures; ownership concentration, managerial ownership and government ownership on firm performance. A multiple regression analysis was employed on sample data collected over ten years from 2001-2010 from 80 South African companies to test the magnitude of their influence to company performance as measured by return on assets (ROA). This study found a positive and significant correlation between ownership concentration, government ownership and firm performance. Results also showed a negative relationship between insider ownership and firm performance. To this account, the research concludes that managerial ownership is a single factor that significantly weighs down company performance. In validating the significance of the performance determinance model, evidence shows that companies that maintain the recommended King Report shareholding structure have an average to above average performance. Hence, corporate governance is a critical catalyst for company performance.

Corporate Ownership Structure and Firm Value: Empirical Evidence of Jse-Listed Firms, South Africa

“…Consistent with previous studies of Cameron (2012), Mugobo et al (2016) in South Africa, this study found that the coefficient of the ownership concentration is negative and statistically significantly related to firm value measures of Tobin's Q and ROA. This finding is contrary to Berle and Means (1932), who proposed the importance of large shareholders to reduce corporate risk and increase corporate performance.…”

“…ROA, the accounting base of measuring firm value, is 10.04 on average with a minimum and maximum value of -845 to 105, respectively, during the study period from 2004 to 2016. It is lower than that observed by Mugobo et al (2016) with 16.0 and Zondi and Sibanda (2015) with 14.73. The average value of ownership concentration (OC) measured by the number of percentage share with a vote held by large five shareholders on the JSE equity market is 40.10%, and this is higher than the 32.36% reported by Steyn and Stainbank (2013) on the same stock exchange in South Africa.…”

“…In this study, foreign ownership is described as the percentage of a firm's shares (votes) held by foreign or international investors. Managerial ownership is measured as the sum of ordinary shares owned by insiders such as the board of directors, the CEO, and the managers that run the firm (De Miguel et al 2004;McConnell and Servaes, 1990;Morck et al 1988;Short and Keasey, 1999;Himmelberg et al 1999;Zondi and Sibanda, 2015;Mugobo et al 2016;Ntim, 2013;Al-Matari et al 2013;Meyer and de Wet, 2013).…”

Ownership concentration, investor protection and economic performance in public agroindustrial companies with the listing on warsaw stock exchange

“…The ownership structure is seen as one of the most important mechanisms of corporate governance, and it becomes particularly important in conditions characterized by a high degree of ownership concentration (ÁVILA;ROCHA;DA SILVA, 2015;CONNELLY, et al, 2010;DEMSETZ;VILLALONGA, 2001;FACCIO;FILATOTCHEV, et al, 2007;HOLDERNESS, 2017;ILHAN-NAS, et al, 2018;KALEZIĆ, 2015;SHLEIFER, 1999;LEPORE, et al, 2017;MUGOBO;MUTIZE;ASPELING, 2016;VISHNY, 1986;SINGLA;GEORGE;VELIYATH, 2017;STULZ, 2005;SURESHA;RAVIKUMAR, 2018;THOMSEN;PEDERSEN, 2000;VEGA SALAS;DENG, 2017).…”

“…Recently, we witnessed a surge in research from all over the world that are increasingly investigating the impact of ownership structure on the performance of corporations (ÁVILA, et al, 2015;ILHAN-NAS, et al, 2018;KALEZIĆ, 2015;MUGOBO, et al, 2016). A number of those researchers have identified that in many jurisdictions around the world ownership is concentrated (sometimes highly concentrated) in the hands of few -one or more large shareholders (BARCA; BECHT, 2002;LA PORTA, et al, 1999;MAURY;PAJUSTE, 2005).…”