IDEAS home Printed from https://ideas.repec.org/a/agr/journl/vxxviy2019i4(621)p93-110.html
   My bibliography  Save this article

Corporate ownership structure and performance: An enquiry into India

Author

Listed:
  • Pradiptarathi PANDA

    (National Institute of Securities Markets (NISM), Maharashtra, India)

  • Jinesh PANCHALI

    (Arham Advisors, Navi Mumbai, India)

Abstract

Influence of corporate ownership structure on corporate performance and governance has been a matter of debate and investigation in the literature of financial performance, and financial economics. This study explores the nature and extent of the relationship between ownership category and financial performance of the firm in limited manner. It investigates as to how heterogeneity of owners as well as the ownership category of the firm, per se, impacts the corporate performance. Employing panel regression model, the results show ownership structure impacts financial performance but only selectively, and the strength of the impact appears weak. This creates a basis for further analysis to understand the incentives and examine the impact of ownership structure on corporate financial performance across the sectors and the markets.

Suggested Citation

  • Pradiptarathi PANDA & Jinesh PANCHALI, 2019. "Corporate ownership structure and performance: An enquiry into India," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(621), W), pages 93-110, Winter.
    • Handle: RePEc:agr:journl:v:xxvi:y:2019:i:4(621):p:93-110
    as

    Download full text from publisher

    File URL: http://store.ectap.ro/articole/1423.pdf
    Download Restriction: no
    File URL: http://www.ectap.ro/articol.php?id=1423&rid=137
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Coles, Jeffrey L. & Lemmon, Michael L. & Felix Meschke, J., 2012. "Structural models and endogeneity in corporate finance: The link between managerial ownership and corporate performance," Journal of Financial Economics, Elsevier, vol. 103(1), pages 149-168.
    2. Barclay, Michael J. & Holderness, Clifford G., 1989. "Private benefits from control of public corporations," Journal of Financial Economics, Elsevier, vol. 25(2), pages 371-395, December.
    3. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    4. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-349, June.
    5. Gozzi, Juan Carlos & Levine, Ross & Schmukler, Sergio L., 2008. "Internationalization and the evolution of corporate valuation," Journal of Financial Economics, Elsevier, vol. 88(3), pages 607-632, June.
    6. Villalonga, Belen & Amit, Raphael, 2006. "How do family ownership, control and management affect firm value?," Journal of Financial Economics, Elsevier, vol. 80(2), pages 385-417, May.
    7. Stulz, ReneM., 1988. "Managerial control of voting rights : Financing policies and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 25-54, January.
    8. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    9. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110-110.
    10. Lucian Bebchuk & Alma Cohen & Allen Ferrell, 2009. "What Matters in Corporate Governance?," The Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 783-827, February.
    11. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, June.
    12. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
    13. Weisbach, Michael S., 1995. "CEO turnover and the firm's investment decisions," Journal of Financial Economics, Elsevier, vol. 37(2), pages 159-188, February.
    14. Himmelberg, Charles P. & Hubbard, R. Glenn & Palia, Darius, 1999. "Understanding the determinants of managerial ownership and the link between ownership and performance," Journal of Financial Economics, Elsevier, vol. 53(3), pages 353-384, September.
    15. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    16. John S. Earle & Csaba Kucsera & Álmos Telegdy, 2005. "Ownership Concentration and Corporate Performance on the Budapest Stock Exchange: do too many cooks spoil the goulash?," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(2), pages 254-264, March.
    17. Demsetz, Harold & Villalonga, Belen, 2001. "Ownership structure and corporate performance," Journal of Corporate Finance, Elsevier, vol. 7(3), pages 209-233, September.
    18. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351-351.
    19. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    20. Randall K. Morck, 2000. "Concentrated Corporate Ownership," NBER Books, National Bureau of Economic Research, Inc, number morc00-1, March.
    21. Randall Morck & David Stangeland & Bernard Yeung, 2000. "Inherited Wealth, Corporate Control, and Economic Growth The Canadian Disease?," NBER Chapters, in: Concentrated Corporate Ownership, pages 319-372, National Bureau of Economic Research, Inc.
    22. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
    23. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation," Scholarly Articles 29407535, Harvard University Department of Economics.
    24. Holl, Peter, 1975. "Effect of Control Type on the Performance of the Firm in the U.K," Journal of Industrial Economics, Wiley Blackwell, vol. 23(4), pages 257-271, June.
    25. Leech, Dennis & Leahy, John, 1991. "Ownership Structure, Control Type Classifications and the Performance of Large British Companies," Economic Journal, Royal Economic Society, vol. 101(409), pages 1418-1437, November.
    26. Im, K.S. & Pesaran, M.H., 2003. "On The Panel Unit Root Tests Using Nonlinear Instrumental Variables," Cambridge Working Papers in Economics 0347, Faculty of Economics, University of Cambridge.
    27. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    28. R. Joseph Monsen & John S. Chitj & David E. Cooley, 1968. "The Effect of Separation of Ownership and Control on the Performance of the Large Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(3), pages 435-451.
    29. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    30. Panayotis Kapopoulos & Sophia Lazaretou, 2007. "Corporate Ownership Structure and Firm Performance: evidence from Greek firms," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 144-158, March.
    31. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    32. Jayati Sarkar & Subrata Sarkar, 2000. "Large Shareholder Activism in Corporate Governance in Developing Countries: Evidence from India," International Review of Finance, International Review of Finance Ltd., vol. 1(3), pages 161-194, September.
    33. Ronald C. Anderson & David M. Reeb, 2003. "Founding-Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1327, June.
    34. Kim, Wi Saeng & Sorensen, Eric H., 1986. "Evidence on the Impact of the Agency Costs of Debt on Corporate Debt Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(2), pages 131-144, June.
    35. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 375-390, June.
    36. McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
    37. Chung, Kee H. & Pruitt, Stephen W., 1996. "Executive ownership, corporate value, and executive compensation: A unifying framework," Journal of Banking & Finance, Elsevier, vol. 20(7), pages 1135-1159, August.
    38. Holderness, Clifford G. & Sheehan, Dennis P., 1988. "The role of majority shareholders in publicly held corporations : An exploratory analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 317-346, January.
    39. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    40. King, Michael R. & Santor, Eric, 2008. "Family values: Ownership structure, performance and capital structure of Canadian firms," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2423-2432, November.
    41. Her‐Jiun Sheu & Chi‐Yih Yang, 2005. "Insider Ownership Structure and Firm Performance: a productivity perspective study in Taiwan's electronics industry," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(2), pages 326-337, March.
    42. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-1177, December.
    43. Short, Helen & Keasey, Kevin, 1999. "Managerial ownership and the performance of firms: Evidence from the UK," Journal of Corporate Finance, Elsevier, vol. 5(1), pages 79-101, March.
    44. Morck, Randall K. (ed.), 2000. "Concentrated Corporate Ownership," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226536781, December.
    45. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    46. Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 169-215.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:agr:journl:v:4(621):y:2019:i:4(621):p:93-110 is not listed on IDEAS
    2. Hamadi, Malika & Heinen, Andréas, 2015. "Firm performance when ownership is very concentrated: Evidence from a semiparametric panel," Journal of Empirical Finance, Elsevier, vol. 34(C), pages 172-194.
    3. Mai, Nhat Chi, 2017. "Ownership concentration, state ownership and firm performance: Empirical evidence from the Vietnamese stock market," OSF Preprints zgvsw, Center for Open Science.
    4. Arosa, Blanca & Iturralde, Txomin & Maseda, Amaia, 2010. "Ownership structure and firm performance in non-listed firms: Evidence from Spain," Journal of Family Business Strategy, Elsevier, vol. 1(2), pages 88-96, June.
    5. San Martin-Reyna, J.M. & Duran-Encalada, Jorge A., 2012. "The relationship among family business, corporate governance and firm performance: Evidence from the Mexican stock exchange," Journal of Family Business Strategy, Elsevier, vol. 3(2), pages 106-117.
    6. González, Maximiliano & Guzmán, Alexander & Pombo, Carlos & Trujillo, María-Andrea, 2012. "Family firms and financial performance: The cost of growing," Emerging Markets Review, Elsevier, vol. 13(4), pages 626-649.
    7. Georgeta Vintila & Stefan Cristian Gherghina & Mihai Nedelescu, 2014. "The Effects of Ownership Concentration and Origin on Listed Firms’ Value: Empirical Evidence from Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 51-71, October.
    8. Weiß, Christian, 2010. "The Ownership Concentration of Firms: Three Essays on the Determinants and Effects," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 30247, July.
    9. Georgeta Vintila & Stefan Cristian Gherghina, 2014. "Insider Ownership and the Value of the Bucharest Stock Exchange Listed Companies: Convergence-of-Interest or Entrenchment Effect?," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 183-195.
    10. Georgeta Vintila & tefan Cristian Gherghina, 2015. "Does Ownership Structure Influence Firm Value? An Empirical Research towards the Bucharest Stock Exchange Listed Companies," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 501-514.
    11. Attiya Y. Javid & Robina Iqbal, 2010. "Corporate Governance in Pakistan : Corporate Valuation, Ownership and Financing," Governance Working Papers 22830, East Asian Bureau of Economic Research.
    12. Zeineb Barka & Taher Hamza, 2020. "The effect of large controlling shareholders on equity prices in France: monitoring or entrenchment?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(3), pages 769-798, September.
    13. Naeem Tabassum & Satwinder Singh, 2020. "Corporate Governance and Organisational Performance," Springer Books, Springer, number 978-3-030-48527-6, September.
    14. Marc Goergen & Christine A. Mallin & Eve Mitleton-Kelly & Ahmed Al-Hawamdeh & Iris H-Y Chiu, 2010. "Corporate Governance and Complexity Theory," Books, Edward Elgar Publishing, number 13927.
    15. Chen, Ming-Yuan, 2005. "Group affiliation, identity of managers, and the relation between managerial ownership and performance," International Review of Financial Analysis, Elsevier, vol. 14(5), pages 533-558.
    16. Rossi, Fabrizio & Barth, James R. & Cebula, Richard J., 2018. "Do shareholder coalitions affect agency costs? Evidence from Italian-listed companies," Research in International Business and Finance, Elsevier, vol. 46(C), pages 181-200.
    17. Margaritis, Dimitris & Psillaki, Maria, 2010. "Capital structure, equity ownership and firm performance," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 621-632, March.
    18. King, Michael R. & Santor, Eric, 2008. "Family values: Ownership structure, performance and capital structure of Canadian firms," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2423-2432, November.
    19. Ming-Yuan Chen, 2006. "Managerial ownership and firm performance: an analysis using switching simultaneous-equations models," Applied Economics, Taylor & Francis Journals, vol. 38(2), pages 161-181.
    20. Sylvain Marsat & Yves Mard & Fabien Roux, 2014. "Ownership structure and corporate financial performance: evidence from France [Structure de l’actionnariat et performance financière de l’entreprise : le cas français]," Post-Print hal-02156607, HAL.
    21. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:agr:journl:v:xxvi:y:2019:i:4(621):p:93-110. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marin Dinu (email available below). General contact details of provider: https://edirc.repec.org/data/agerrea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.