7 Ownership Structures and Performance of SMEs: An Empirical Analysis
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Abstract
Ownership structure and its impact on corporate performance have been a prominent and debatable subject within the framework of Corporate Governance. Empirically, the studies have checked the non-linear impact of various ownership structure variables individually on firm performance but not together. The current study uses multiple theoretical perspectives to examine whether the non-linear relationship of multiple ownership variables on the performance of Indian-listed small-cap corporates moves in the same direction or they move in the opposite direction. Promotor(s), Institutional Investor(s), and Non-Institutional Investor(s) are some of the ownership structure variables. Market-based measure, i.e., Tobin’s Q, is utilized to capture firm performance. Panel regression indicates that an initial increase in the promoter holdings of small-cap corporates makes them more entrenched in extracting private benefits, which increases the agency cost and reduction in the performance of corporates. However, when the promoter holdings surpass a limit, they have much more incentive and control to oversee the company’s performance. On the contrary to it, when the institutional holdings are below a level, any marginal increase in it would significantly increase their monitoring role due to the efficient monitoring hypothesis. After this, numerous institutional investors could trigger “conflicting” interests, thereby hurting the companies’ performance. Also, the non-institutional holdings adversely impacted Indian corporate performance. The findings result in specific implications to be addressed by the corporates, government and policymakers.
Abstract
Ownership structure and its impact on corporate performance have been a prominent and debatable subject within the framework of Corporate Governance. Empirically, the studies have checked the non-linear impact of various ownership structure variables individually on firm performance but not together. The current study uses multiple theoretical perspectives to examine whether the non-linear relationship of multiple ownership variables on the performance of Indian-listed small-cap corporates moves in the same direction or they move in the opposite direction. Promotor(s), Institutional Investor(s), and Non-Institutional Investor(s) are some of the ownership structure variables. Market-based measure, i.e., Tobin’s Q, is utilized to capture firm performance. Panel regression indicates that an initial increase in the promoter holdings of small-cap corporates makes them more entrenched in extracting private benefits, which increases the agency cost and reduction in the performance of corporates. However, when the promoter holdings surpass a limit, they have much more incentive and control to oversee the company’s performance. On the contrary to it, when the institutional holdings are below a level, any marginal increase in it would significantly increase their monitoring role due to the efficient monitoring hypothesis. After this, numerous institutional investors could trigger “conflicting” interests, thereby hurting the companies’ performance. Also, the non-institutional holdings adversely impacted Indian corporate performance. The findings result in specific implications to be addressed by the corporates, government and policymakers.
Chapters in this book
- Frontmatter I
- Preface V
- Contents VII
- Introduction IX
- 1 Enhancing SMEs’ Sustainability Through Innovative Practices 1
- 2 The Approach of SMEs Towards Green Management Practices 17
- 3 Factors Influencing Financial Backers’ Exit Decisions from a New Venture 33
- 4 Technological Advancement in Industrial Revolution 4.0 for Sustainable Development of India: Understanding Linkages in Theory and Practice 57
- 5 Impact of Macroeconomic Determinants and Corporate Attributes on Firms’ Financial Success in India 73
- 6 Exploring Individual Investor Intentions Towards Socially Responsible Investment 95
- 7 Ownership Structures and Performance of SMEs: An Empirical Analysis 119
- 8 Short-Run Pricing Performance of Selected Indian IPOs During COVID-19 for Alternative Investment Avenue 141
- 9 Emerging Green: Exploring Strategic Factors for SMEs’ Adoption of Green Technology and Innovation in India 165
- 10 Impact of Sustainability and Green Finance on SMEs to Promote Green Growth 187
- 11 Progress Intention and Sales Revenue Growth in Micro, Small and Medium Enterprises (SMEs) 199
- 12 Green Management Practices by Small and Medium Enterprises 211
- 13 An Analysis of MSMEs’ Contributions to the Promotion of SDGs in India 227
- 14 Impact of Innovation and Its Role in Small Medium Enterprises’ Sustainability 247
- 15 Effect of Government Policies on SME Innovation and Entrepreneurship 267
- 16 A Study on Various Aspects of SMEs’ Orientation for Corporate Social Responsibility 285
- 17 SME and Environmental Sustenance: Digital Marketing in SMEs via Data- Driven Strategies 315
- List of Contributors 333
- About the Editors 339
- List of Tables 341
- List of Figures 343
- Index 345
Chapters in this book
- Frontmatter I
- Preface V
- Contents VII
- Introduction IX
- 1 Enhancing SMEs’ Sustainability Through Innovative Practices 1
- 2 The Approach of SMEs Towards Green Management Practices 17
- 3 Factors Influencing Financial Backers’ Exit Decisions from a New Venture 33
- 4 Technological Advancement in Industrial Revolution 4.0 for Sustainable Development of India: Understanding Linkages in Theory and Practice 57
- 5 Impact of Macroeconomic Determinants and Corporate Attributes on Firms’ Financial Success in India 73
- 6 Exploring Individual Investor Intentions Towards Socially Responsible Investment 95
- 7 Ownership Structures and Performance of SMEs: An Empirical Analysis 119
- 8 Short-Run Pricing Performance of Selected Indian IPOs During COVID-19 for Alternative Investment Avenue 141
- 9 Emerging Green: Exploring Strategic Factors for SMEs’ Adoption of Green Technology and Innovation in India 165
- 10 Impact of Sustainability and Green Finance on SMEs to Promote Green Growth 187
- 11 Progress Intention and Sales Revenue Growth in Micro, Small and Medium Enterprises (SMEs) 199
- 12 Green Management Practices by Small and Medium Enterprises 211
- 13 An Analysis of MSMEs’ Contributions to the Promotion of SDGs in India 227
- 14 Impact of Innovation and Its Role in Small Medium Enterprises’ Sustainability 247
- 15 Effect of Government Policies on SME Innovation and Entrepreneurship 267
- 16 A Study on Various Aspects of SMEs’ Orientation for Corporate Social Responsibility 285
- 17 SME and Environmental Sustenance: Digital Marketing in SMEs via Data- Driven Strategies 315
- List of Contributors 333
- About the Editors 339
- List of Tables 341
- List of Figures 343
- Index 345
