Regional dynamics of ownership structure and their impact on firm performance and firm valuation

2018 ◽  
Vol 28 (1) ◽  
pp. 129-147 ◽  
Author(s):  
Awais Ali ◽  
Fu Qiang ◽  
Sadia Ashraf
Keyword(s):  
Firm Performance ◽  
Ownership Structure ◽  
Institutional Ownership ◽  
Business Environment ◽  
State Ownership ◽  
Firm Valuation ◽  
Market Valuation ◽  
Content Type ◽  
Geographical Regions ◽  
The Impact

Purpose The purpose of this paper is to analyse the impact of ownership structure on firm valuation and performance across different geographical regions within mainland China. Design/methodology/approach The authors classify China in six geographical regions and use cross-sectional data of companies with A-shares listed on domestic stock exchanges in China for the year-end 2015. Using data from CSMAR and Wind database, they use multivariate regression technique and analytically compare the consistency of relationship between operational variables of ownership structure with corporate performance and evaluation. Findings The authors find that institutional ownership and state ownership negatively affect market valuation throughout various geographical regions of China. Further, in East, Northwest, South Central and Southwestern parts of China, managerial ownership and concentration of shareholding among top ten shareholders positively influence return on equity (ROE). Interestingly, institutional shareholding negatively affects return on assets (ROA), while institutional ownership has a neutral effect on profitability margin in Northeast China. Although in northern part of China, this relationship is slightly positive. In East China region, state ownership and ownership concentration are directly proportional to profitability margin. Practical implications As some of the findings exhibit weak state of market efficiency in some regions, the study may also be useful in identifying arbitrage opportunities across different regions. Moreover, this study suggests that regions with the same business environment and conditions anywhere around the globe invite same or similar ownership structure for better firm performance and valuation. Originality/value The study provides unique understanding of relationship between ownership structure, market valuation and firm performance in various parts of China and will be an addition to the relevant literature. Given a change in company’s ownership structure and considering its region of incorporation, this study will help investment analysts in assessing performance and market valuation of the firm. It will also assist several classes of investors, financial institutions and international businesses in making their investment decisions.

scholarly journals International ownership and firm performance in Arab economies

2020 ◽  
Vol 17 (4, Special Issue) ◽  
pp. 308-318
Author(s):  
Stefan Lutz ◽  
Karim Hegazy ◽  
Ehab K. A. Mohamed ◽  
Mohamed A. K. Basuony
Keyword(s):  
Firm Performance ◽  
Ownership Structure ◽  
Business Environment ◽  
State Ownership ◽  
Mena Region ◽  
Cross Sectional ◽  
Ownership Structures ◽  
And Performance ◽  
The Impact ◽  
Better Than

This paper aims at filling existing research by examining the impact of corporate governance and ownership structure on firm performance using cross-sectional data from companies in the MENA region for the years 2009-2013. The results indicate that higher ownership concentration is associated with higher returns. Furthermore, firms with higher international ownership share tend to perform better than those with only local private and/or state ownership. The results suggest some prevalent features with respect to ownership and performance of firms in the MENA region. Due to the volatile social and business environment, these firms operate in, they may be particularly dependent on effective ownership structures and support which may be provided by international, institutional, and large shareholders.

How does ownership structure affect the financing and dividend decisions of firm?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tahar Tayachi ◽  
Ahmed Imran Hunjra ◽  
Kirsten Jones ◽  
Rashid Mehmood ◽  
Mamdouh Abdulaziz Saleh Al-Faryan
Keyword(s):  
Ownership Structure ◽  
Dividend Policy ◽  
Generalized Method Of Moments ◽  
Institutional Ownership ◽  
Agency Cost ◽  
Debt Financing ◽  
Policy Implications ◽  
Managerial Ownership ◽  
Content Type ◽  
The Impact

Purpose Ownership structure deals with internal corporate governance mechanism, which plays important role in minimizing conflict of interests between shareholders and management Ownership structure is an important mechanism that influences the value of firm, financing and dividend decisions. This paper aims to examine the impact of the ownership structures, i.e. managerial ownership, institutional ownership on financing and dividend policy. Design/methodology/approach The authors use panel data of manufacturing firms from both developed and developing countries, and the generalized method of moments (GMM) is applied to analyze the results. The authors collect the data from DataStream for the period of 2010 to 2019. Findings The authors find that managerial ownership and ownership concentration have significant and positive effects on debt financing, but they have significant and negative effects on dividend policy. Institutional ownership shows a positive impact on financing decisions and dividend policy for sample firms. Originality/value This study fills the gap by proving the policy implications for both firms and investors, as managers prefer debt financing, but at the same time try to ignore dividend payment. Therefore, investors may not invest in firms with a higher proportion of managerial ownership and may choose to invest more in institutional ownership, which lowers the agency cost.

The relationship between ownership structure and firm financial performance

2018 ◽  
Vol 25 (1) ◽  
pp. 319-333 ◽  
Author(s):  
Tariq Tawfeeq Yousif Alabdullah
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Emerging Economies ◽  
Ownership Structure ◽  
Foreign Ownership ◽  
Fiscal Year ◽  
Content Type ◽  
Firm Financial Performance ◽  
The Impact ◽  
Practical Implications

Purpose Previous studies that dealt with corporate governance have witnessed gradually significant growth that created some new trends. The purpose of this paper is to be involved in such trends through examining the link between ownership structure as one of the important corporate governance mechanisms and firm performance in Jordan as one of emerging economies. Design/methodology/approach The current study used the multiple regression method to analyze available data for non-financial firms listed in the Amman Stock Exchange for the fiscal year 2012. Findings The findings revealed that managerial ownership has a positive impact on performance. On the other hand, the findings surprisingly showed no evidence to support the impact of foreign ownership on performance. Moreover, there is a significant evidence to support the fact that company size has no impact on firm performance. The findings also revealed that industry type has no impact on firm performance. Practical implications The practical implications of the current study demonstrated that good corporate governance is imperative to all organizations and must be encouraged for the interest of all stakeholders. Unlike the majority of the previous studies, the current study unexpectedly found that foreign ownership is not significantly contributing to the firm performance. Thus, Jordanian Government and other related/responsible parties should formulate policies for the foreign investors. Originality/value Interestingly, from developed and developing countries perspective, the study is the first of its kind that exclusively chose the mechanisms of ownership structure in its relationship with firm performance represented by market share, where no previous study has tested foreign ownership in such relationship. In that, this study is the first study in emerging economies to investigate such a link. Such new insights on this relationship by current study provide helpful information that is of great value to the government, academics, policy makers, and other stakeholders.

Working capital management and firm’s valuation, profitability and risk

2019 ◽  
Vol 15 (2) ◽  
pp. 191-204 ◽  
Author(s):  
Ben Le
Keyword(s):  
Firm Performance ◽  
Panel Data ◽  
Emerging Market ◽  
Firm Valuation ◽  
Capital Management ◽  
Working Capital ◽  
Data Set ◽  
Working Capital Management ◽  
Content Type ◽  
The Impact

PurposeThe purpose of this paper is to examine the effects of working capital management on firm valuation, profitability and risk.Design/methodology/approachThe paper uses a panel data set of 497 firms covering the period 2007 to 2016. The authors test the effects of working capital management on firm valuation, profitability and risk using the panel data methodology that includes firm and year fixed effects regressions.FindingsThe authors find a significantly negative relationship between net working capital (NWC) and firm valuation, profitability and risk. The results suggest that, in managing working capital, firm managers must make a trade-off between their objectives for profitability and risk control. Working-capital management is of particular importance in firms with less access to capital; it is also important when firms are expanding their investments during periods of economic recovery.Originality/valueThis paper contributes to the literature in several ways. First, to my knowledge, it provides the most comprehensive investigation, to date, on the relationship between working capital management and firm valuation, profitability and risk in an emerging market. Second, this study documents the existence of an optimal level of NWC in an emerging market. Third, firm performance, as measured in both market and accounting value, can be improved with efficient working capital management. Finally, the study includes the impact of the business cycle in an analysis of the effects of working capital management on firm performance.

scholarly journals The impact of ownership structure on financial reporting quality in the east

2017 ◽  
Vol 25 (2) ◽  
pp. 178-197 ◽  
Author(s):  
Qaiser Rafique Yasser ◽  
Abdullah Al Mamun ◽  
Margurite Hook
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Ownership Structure ◽  
Developing Economies ◽  
Reporting Quality ◽  
State Ownership ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Negatively Associated ◽  
The Impact

Purpose This paper aims to focus mainly on the relationship between ownership structure and earnings management of a developed and two developing economies, and is distinct from prior research. Design/methodology/approach Using a sample of firms from three countries (Australia, Malaysia and Pakistan), the detailed ownership evolutions for the period 2011-2013 were observed. Findings Overall, the authors find that in the East, ownership concentration is negatively associated with financial reporting quality. Individual ownership and group ownership were negatively associated with earnings management in Pakistan, however, not in Malaysia where the same were positively associated. Further, the result of this study indicated that state ownership is negatively associated with firm performance. Among the control variables, it was found that larger firms were negatively correlated with financial reporting, while firms with a larger board size and mature in the maneuver were coupled positively with earnings management. Originality/value The results highlight the highly individualized effects of blockholders and the need for research to further understand the mechanisms through which shareholders impact financial reporting quality.

Dynamic study of corporate governance structure and firm performance in China

2019 ◽  
Vol 13 (2) ◽  
pp. 299-317 ◽  
Author(s):  
Lin Shao
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Generalized Method Of Moments ◽  
Supervisory Board ◽  
Governance Structure ◽  
State Ownership ◽  
Content Type ◽  
Listed Firms ◽  
The Impact ◽  
The Relationship

Purpose The paper aims to provide a comprehensive investigation of the relationship between corporate governance (CG) structure and firm performance in Chinese listed firms from 2001 to 2015. The authors’ motivation derives from the fact that the CG system in China is different from those in the US, the UK, Germany, Japan and other countries. Design/methodology/approach A large unbalanced sample, covering more than 22,700 observations in Chinese listed firms, was used to explore, by means of a system-generalized method-of-moments (GMM) estimator, the relationship between CG structure and firm performance to remove potential sources of endogeneity. Findings Results show that Chinese CG structure is endogenously determined by the CG mechanisms investigated: there is no relationship between board size (including independent directors) and firm performance; CEO duality has a significantly negative effect on firm performance; concentration of ownership has a significantly positive influence on firm performance; managerial ownership is negatively correlated with firm performance; state ownership has a significantly positive effect on firm performance; and a supervisory board is positively correlated with firm performance. Practical implications The findings provide policymakers and firm managers with useful empirical guidance concerning CG in China. Originality/value Few integrative studies have examined the impact of CG structure on firm performance in China. This study adds new empirical evidence that the relation between CG structure and performance in China is endogenous and dynamic when controlling for unobserved heterogeneity, simultaneity, and dynamic endogeneity.

Owners and employees wages: a question of rent appropriability

2015 ◽  
Vol 53 (2) ◽  
pp. 250-267 ◽  
Author(s):  
Nieves L. L. Díaz-Díaz ◽  
Petra De Saá-Pérez
Keyword(s):  
Human Capital ◽  
Ownership Structure ◽  
Economic Performance ◽  
Capital Investment ◽  
Dynamic Models ◽  
Negative Influence ◽  
State Ownership ◽  
Business Strategies ◽  
Content Type ◽  
The Impact

Purpose – The purpose of this paper is to studuy how the owner identity affects the investment in human capital, measured by wage intensity, as well as the moderating effect of firm’s performance. Design/methodology/approach – A balanced panel of 1,266 Spanish firms that respond to the Survey of Business Strategies for a five-years period was used, which represents a total of 6,330 observations. The dynamic models are estimated using the general method of moments. Findings – The state ownership has a positive and significant effect on specific wage intensity. However, when ownership is in private hands – foreign shareholders, other companies-, the effect is significant but negative. In firms with state ownership, greater economic performance has a negative influence on human capital investment. The results also reveal that while privately owned firms – those with foreign shareholders – tend to invest less in human capital, that tendency diminishes when the firm obtains higher economic performance. Practical implications – Different owners may have different objectives and decision-making horizons, which affect the firm’s investment on human capital. The results obtained regarding the owner identity-wage intensity relationship may serve as a reference for the non-listed firms of continental Europe. The influence of ownership structure on the firm’s decision to invest in human capital is conditioned by the firm’s economic performance. Originality/value – The paper reveals the importance of considering each of the firm’s owners, since their influence on wage intensity differs according to the identity of the owner. There are little empirical papers which analyze the impact of ownership structure on wage intensity, depending on the identity of firm’s owners in a civil context. Moreover, a dynamic panel model is needed due to the firm’s wage intensity does not adjust immediately as their wages are often referring to the previous year rather than being fully negotiated. This paper can be considered a step forward in understanding owner identity characteristics in Spanish-European context.

The impact of strong and balanced organizational cultures on firm performance

2018 ◽  
Vol 10 (1) ◽  
pp. 16-35 ◽  
Author(s):  
Panagiotis Polychroniou ◽  
Panagiotis Trivellas
Keyword(s):  
Firm Performance ◽  
Business Environment ◽  
Negative Influence ◽  
Organizational Level ◽  
Sustainable Competitive Advantage ◽  
Competing Values ◽  
Content Type ◽  
Culture Strength ◽  
Innovation Competence ◽  
The Impact

Purpose This study aims to investigate the relationship between organizational culture and performance. It concerns the aspects of culture related to culture strength and unbalance and its impact on introvert and extrovert firm performance, controlling for business environment and size. Design/methodology/approach Based on the competing values model (CVM), culture strength is measured as the intensity of the culture values driving the company. The cultural unbalance is measured by the sum of absolute deviations of organizational members’ culture perceptions across the four archetypes (adhocracy, clan, hierarchy and market) imposed by CVM from the individual “average” shared cultural value. Evidence is drawn upon a sample of 1,305 employees of 114 Greek firms. Findings The findings indicate a strong positive relationship between culture strength and internal performance (innovation competence and human relations) as well as firm outcomes (profitability, growth and reputational assets). On the contrary, culture unbalance exerts a negative influence to market position, growth and innovation competence. Practical implications Understanding the nature of the association between culture strength, unbalance and firm performance would enable academics and practitioners to reflect critically on the core culture values which shape employee involvement and formulate leaders’ quality improvement decisions and actions, so as to achieve sustainable competitive advantage at the organizational level. Originality/value This research provides supporting empirical evidence for the culture–performance link by identifying the principle culture value characteristics (strength and unbalance), which exert both direct and interaction effects on the introvert and extrovert aspects of firm performance.

scholarly journals Ownership Structure and Firm Performance: An Empirical Analysis of Chinese Companies

2016 ◽  
Vol 4 (2) ◽  
pp. 57 ◽  
Author(s):  
Hui Zhang ◽  
Khine Kyaw
Keyword(s):  
Firm Performance ◽  
Ownership Structure ◽  
Positive Relationship ◽  
Institutional Ownership ◽  
State Ownership ◽  
Ownership Concentration ◽  
Annual Reports ◽  
Panel Model ◽  
Chinese Companies ◽  
The Relationship

This study examines the relationship between ownership structure and firm performance in Chinese companies. We hand collected ownership data on 1178 non-financial companies with a total of 5815 firm-years from annual reports. Through fixed-effect panel model, this study has the following findings. First, there is a positive relationship between firm performance and institutional ownership in Chinese companies. Second, the proportion of tradable shares negatively affects firm performance. Third, ownership concentration and state ownership appear to not affect firm performance.

Boosting firm performance via enterprise agility and network structure

2012 ◽  
Vol 50 (6) ◽  
pp. 1022-1044 ◽  
Author(s):  
Chyan Yang ◽  
Hsian‐Ming Liu
Keyword(s):  
Firm Performance ◽  
Network Structure ◽  
Causal Relation ◽  
Business Environment ◽  
Measurement Properties ◽  
Equation Modeling ◽  
Survey Method ◽  
Content Type ◽  
Enterprise Agility ◽  
The Impact

PurposeDrawing on a network perspective on enterprise agility, the purpose of this paper is to explore whether firms with superior network structure not only may be better able to generate direct effect on firm performance, but whether a superior network structure may also help firms to create better firm agility and thus enhance their performance.Design/methodology/approachThe study employed a survey method and data were collected from 250 companies in Taiwan's glass industry. Using structural equation modeling (SEM) technology, it specified the measurement properties of survey instrument such as reliabilities and validities and then identified causal relation among latent constructs to examine causal effects of hypotheses testing.FindingsThe results show that a firm's agility capability and its network structure are a critical competitive strategy source of firm performance. Moreover, network structure also partially mediates the impact of enterprise agility on firm performance.Research limitations/implicationsBecause the data were collected from a single industry and firm performance is evaluated by subjective managerial assessments, further research may be necessary by using the data involving multiple industries with objective performance indices for more meaningful and generalized results.Practical implicationsThe findings confirm the importance of enterprise agility for contemporary firms in today's dynamic business environment. By reinforcing enterprise agility, firms could react better to unpredictable changes. In addition, firms also are suggested to put more effort into developing and maintaining their network structures, both as repositories of external resources and as boosters of enterprise agility.Originality/valueThe paper provides evidence regarding the impact of enterprise agility and network structure on firm performance.

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