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Ownership Structure and Corporate Firm Performance

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Author Info
Jayesh Kumar (Indira Gandhi Institute of Development Research)

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Abstract

Corporate Governance deals with the issue, how suppliers of finance to corporations assure themselves of getting a return on their investment. Several Studies have examined the relationship between managerial ownership and firm performance. Using different samples most of the studies provide general support for the argument that increase in managerial ownership increases firm performance. However, these results have been questioned recently. This work examines empirically the effects of ownership structure on the firm performance for a large sample of Indian Corporate Firms, from an 'agency perspective'. We examine the literature on this topic by examining the effect of interactions between corporate, foreign, financial, institutional, and managerial ownership. We provide empirical evidence, which suggests that firm size and age is nonlinearly related to the firm performance. Using panel data framework, we show that a large fraction of cross-sectional variation, in performance, found in several studies, is explained by unobserved firm heterogeneity, rather than the share holders holding. We do not find any evidence that the differences in Ownership structure, affect firm performance; after controlling for observed firm characteristics and firm fixed effects.

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Paper provided by EconWPA in its series Finance with number 0304004.

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Length: 42 pages
Date of creation: 20 Apr 2003
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Handle: RePEc:wpa:wuwpfi:0304004

Note: Type of Document - pdf; prepared on Linux pdflatex; to print on HP/PostScript/; pages: 42 ; figures: included. I would like to thank Dr. Kausik CHodhuri for his suggestion and help.
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Related research
Keywords: corporate governance share holding pattern and firm performance

Other versions of this item:

Find related papers by JEL classification:
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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  4. 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. [Downloadable!] (restricted)
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  6. Helen Short & Kevin Keasey & Darren Duxbury, 2002. "Capital Structure, Management Ownership and Large External Shareholders: A UK Analysis," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 9(3), pages 375-399, November. [Downloadable!] (restricted)
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    Other versions:
  10. Jensen, Michael C. & Warner, Jerold B., 1988. "The distribution of power among corporate managers, shareholders, and directors," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 3-24, January. [Downloadable!] (restricted)
    Other versions:
  11. Chhibber, Pradeep & Majumdar, Sumit K, 1998. "State as Investor and State as Owner: Consequences for Firm Performance in India," Economic Development and Cultural Change, University of Chicago Press, vol. 46(3), pages 561-80, April.
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    Other versions:
  13. Barbosa, Natalia & Louri, Helen, 2002. "On the determinants of multinationals' ownership preferences: evidence from Greece and Portugal," International Journal of Industrial Organization, Elsevier, vol. 20(4), pages 493-515, April. [Downloadable!] (restricted)
  14. Anup Agrawal & Charles R. Knoeber, . "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
  15. Stigler, George J & Friedland, Claire, 1983. "The Literature of Economics: The Case of Berle and Means," Journal of Law & Economics, University of Chicago Press, vol. 26(2), pages 237-68, June.
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  19. Shleifer, Andrei & Vishny, Robert W, 1988. "Value Maximization and the Acquisition Process," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 7-20, Winter. [Downloadable!] (restricted)
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