What matters to ownership structure? Evidence from pre- and post-global financial crisis in an emerging market

Abstract

PurposeThe purpose of this paper is to ascertain determining factors of ownership concentration and institutional portfolio ownership in the listed firms of an emerging market during pre-crisis and post-crisis periods and find variations in determining factors between the two varying market conditions.Design/methodology/approachThis paper considers 316 listed firms for the pre-crisis period and 408 firms for the post-crisis period, from the NIFTY-500. Pre-crisis period ranges from FY2000-01 to FY2007-08 and post-crisis period ranges from FY2009-10 to FY2016-17. Two-step GMM is utilized to test the hypotheses by controlling the unobserved heterogeneity and endogeneity issues.FindingsHigher investment and stock market growth leads to ownership dispersion in both the market conditions. Industry information asymmetry leads to dispersion in pre-crisis, while improves concentration in post-crisis phase. Firm size, legal environment and economic growth are found to be a positive determinant of institutional ownership irrespective of market conditions. Institutional investment proliferates with higher stock liquidity and PE ratio, while declines with augmented firm risk, current ratio and stock market turnover during post-crisis phase.Practical implicationsPolicymakers should construct a robust legal environment and focus to improve economic conditions to boost institutional ownership. Corporate executives should concentrate to increase stock liquidity and earnings of the firms, and lower market risk to draw more institutional portfolio investments.Originality/valueThis study would enrich emerging governance literature since studies on the determining factors of ownership holdings are limited in the emerging world. It adds novelty by capturing two different market conditions such as pre-crisis and post-crisis phases to obtain the time-dependent and time-independent determinants. It adds uniqueness by considering the determinants of institutional ownership, which is scarce in ownership studies.

Corporate ownership concentration drivers in a context dominated by private SME's

“…The literature on the empirical study of the determinants of the business ownership structure has been scarce (e.g., Pindado and de la Torre, 2008 ; Panda and Kumar, 2020 ). However, a vast theoretical body prevails (e.g., Jensen and Meckling, 1976 ; Jensen, 1986 ; Shleifer and Vishny, 1986 ; Golbe and Nyman, 2013 ) that identifies a set of factors that can condition the concentration of property.…”

“…From mere suppliers of capital to agents that can influence the government in decision-making, the paradigm shift means that the participation of investors in the shareholder structure assumes particular relevance ( Abdallah and Ismail, 2017 ; Panda and Kumar, 2020 ). Aguilera and Crespi-Cladera (2016) also mention that the ownership structure of companies can be compared between countries; however, government practices differ significantly for different concentrations of ownership.…”

“…Despite the intense and growing research that has been devoted to smaller companies in recent years, few studies have focused on understanding the effect of business characteristics on ownership structure decisions, particularly when considering less developed markets, as concluded by Panda and Kumar (2020) . Also, the vast majority of corporate finance theory has focused on the influence of the ownership structure to sustain companies' decisions.…”

“…Thus, its main objective is to study the effect of a set of business characteristics on the ownership structure of predominantly privately held companies and not on companies traded on the stock exchange, as has been done in recent studies (e.g. Panda and Kumar, 2020 ).…”

“…This work, while departing from the existing literature in this field, provides, in our view, important contributions to the compression of the effect of business characteristics on property structure decisions. First, it takes into account the main characteristics identified in the literature: the dimension/size ( Fassler and Vargas, 2016 ), the profitability ( Panda and Kumar, 2020 ), the leverage ( Fassler and Vargas, 2016 ; Rossi and Cebula, 2016 ), the number of subsidiaries Dhnadirek and Tang (2003) , the gender diversity ( Gyapong et al., 2019 ), quality of the audit ( AlQadasi and Abidin, 2018 ), the board structure characteristics ( Mak and Li, 2001 ; Bekiris, 2013 ), and the number of banks ( Lin et al., 2012 ).…”