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Share holding Pattern and Firm Performance

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  • Jayesh Kumar

    (Xavier Institute of Management)

Abstract

Corporate Governance deals with the issue of how suppliers of finance to corporations assure themselves of getting a return on their investment. Several Studies have examined the relationship between ownership structure and firm performance. Using di erent data 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 study 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 effect of interactions between corporate, foreign, financial institutions, and managerial ownership on firm performance. We provide empirical evidence, which suggests that firm size and age in positively related to the firm performance. Using panel data framework, we show that a large fraction of cross-sectional variation, in firm performance, found in several studies, is explained by unobserved firm heterogeneity, rather than the ownership structure. 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.

Suggested Citation

  • Jayesh Kumar, 2004. "Share holding Pattern and Firm Performance," Finance 0409008, EconWPA.
  • Handle: RePEc:wpa:wuwpfi:0409008 Note: Type of Document - pdf; pages: 10
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    File URL: http://econwpa.repec.org/eps/fin/papers/0409/0409008.pdf
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    References listed on IDEAS

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    1. 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.
    2. 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 561-580, April.
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    4. repec:hrv:faseco:30728046 is not listed on IDEAS
    5. 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.
    6. Michel Habib, 2000. "Firm Value and Managerial Incentives: A Stochastic Frontier Approach," Economics Series Working Papers 2000-FE-03, University of Oxford, Department of Economics.
    7. 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.
    8. Michel A. Habib & Alexander Ljungqvist, 2005. "Firm Value and Managerial Incentives: A Stochastic Frontier Approach," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2053-2094, November.
    9. 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.
    10. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation," Scholarly Articles 29407535, Harvard University Department of Economics.
    11. 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.
    12. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, April.
    13. Stigler, George J & Friedland, Claire, 1983. "The Literature of Economics: The Case of Berle and Means," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 237-268, June.
    14. 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.
    15. Gautam Ahuja & Sumit Majumdar, 1998. "An Assessment of the Performance of Indian State-Owned Enterprises," Journal of Productivity Analysis, Springer, vol. 9(2), pages 113-132, March.
    16. Anup Agrawal & Charles R. Knoeber, "undated". "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.
    17. Das, Sanghamitra, 1995. "Size, age and firm growth in an infant industry: The computer hardware industry in India," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 111-126, March.
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    More about this item

    Keywords

    corporate governance; shareholding pattern and firm performance;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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