Abstract
This study investigates the effect of ownership structure and concentration on firm performance for 203 companies from five GCC countries (Qatar, Kuwait, Saudi Arabia, Bahrain and Oman), using a panel data analysis for the period 2000–2010. The study further examines the effects of financial leverage and risk. Our results indicate that ownership structure affects firm performance in GCC countries. Government ownership affects firm performance ROA while foreign and institutional ownership are found not to be significant. The results also show that ownership concentration affects firm performance positively and significantly. A firm’s capital structure has no effect on performance. Furthermore, the study concludes that age and size have a positive and significant impact on corporate performance.
References
Alchian, A., and H.Demsetz. 1972. “Production Information Costs and Economic Organization.” The American Economic Review66:777–95.Search in Google Scholar
Al-Muharrami, S. K., and Y.Khabari. 2006. “Market Structure and Competitive Conditions in the Arab GCC Banking System.” Journal of Banking and Finance30(12):3487–501.10.1016/j.jbankfin.2006.01.006Search in Google Scholar
Baltagi, B. H., and X.Wu Ping. 1999. “Unequally Spaced Panel Data Regressions with AR(1) Disturbances, Econometric Theory.” Cambridge University Press15:814–23.Search in Google Scholar
Baskin, J. 1989. “An Empirical Investigation of the Pecking Order Hypothesis.” Journal of Financial Management18:26–36.10.2307/3665695Search in Google Scholar
Baum, C. F. 2001. “Residual Diagnostics for Cross-Section Time Series Regression Models.” Stata Journal1:101–4.10.1177/1536867X0100100108Search in Google Scholar
Berle, A., and G.Means. 1932. The Modern Corporation and Private Property. New York: Harcourt, Brace, & World.Search in Google Scholar
Breusch, T., and A.Pagan. 1980. “The Lagrange-Multiplier Test and Its Applications to Model Specification in Econometrics.” Review of Economic Studies47:239–53.10.2307/2297111Search in Google Scholar
Chakravarthy, B. S. 1986. “Measuring Strategic Performance.” Strategic Management Journal7:437–58.10.1002/smj.4250070505Search in Google Scholar
Chen, Z., Y. L.Cheung, A.Stouraitis, and A. W. S.Wong. 2005. “Ownership Concentration, Firm Performance, and Dividend Policy in Hong Kong.” Pacific-Basin Finance Journal13:431–49.10.1016/j.pacfin.2004.12.001Search in Google Scholar
Dahlquist, M., L.Pinkowitz, R. M.Stultz, and R.Williamson. 2003. “Corporate Governance and the Home Bias.” Journal of Financial and Quantitative Analysis38:87–110.10.2307/4126765Search in Google Scholar
Davies, M., and B.Schlitzer. 2008. “The Impracticability of an International “One Size Fits All” Corporate Governance Code of Best Practice.” Managerial Auditing Journal23(6):532–44.10.1108/02686900810882093Search in Google Scholar
Demsetz, H. 1983. “The Structure of Corporate Ownership and the Theory of the Firm.” Journal of Law and Economics26:375–90.10.1086/467041Search in Google Scholar
Demsetz, H., and K.Lehn. 1985. “The Structure of Corporate Ownership: Causes and Consequences.” Journal of Political Economy93:1155–77.10.1086/261354Search in Google Scholar
Demsetz, H., and B.Villalonga. 2001. “Ownership Structure and Corporate Performance.” Journal of Corporate Finance7:209–33.10.1016/S0929-1199(01)00020-7Search in Google Scholar
Dessí, R., and D.Robertson. 2003. “Debt, Incentives and Performance: Evidence from UK Panel Data.” The Economic Journal113(490):903–19.10.1111/1468-0297.t01-1-00159Search in Google Scholar
Earle, J. S., C.Kucsera, and A.Telegdy. 2005. “Ownership Concentration and Corporate Performance on the Budapest Stock Exchange: Do Too Many Cooks Spoil the Goulash?” Corporate Governance13:254–64.10.1111/j.1467-8683.2005.00420.xSearch in Google Scholar
Faccio, M., and L. H.Lang. 2002. “The Ultimate Ownership of Western European Corporations.” Journal of Financial Economics65:365–95.10.1016/S0304-405X(02)00146-0Search in Google Scholar
Fama, E. F., and K. R.French. 1999. “Testing Trade-Off and Pecking Order Predictions About the Dividends and Debt.” Working Paper, University of Chicago.10.2139/ssrn.199431Search in Google Scholar
Fama, E., and M.Jensen. 1983. “Separation of Ownership and Control.” Journal of Law and Economics26:134–45.10.1086/467037Search in Google Scholar
Fazlzadeh, A., A.Hendi, and K.Mahboubi. 2011. “The Examination of the Effect of Ownership Structure on Firm Performance in Listed Firms of Tehran Stock Exchange Based on the Type of Industry.” International Journal of Business and Management6:249–66.10.5539/ijbm.v6n3p249Search in Google Scholar
Garcıa-Meca, E., and J.Sanchez-Ballesta. 2011. “Firm Value and Ownership Structure in the Spanish Capital Market.” Corporate Governance11:41–53.10.1108/14720701111108835Search in Google Scholar
Gedajlovic, E., T.Yoshikawa, and M.Hushimoto. 2009. “Ownership Structure, Investment Behaviour and Firm Performance in Japanese Manufacturing Industries.” Organization Studies26:7–35.10.1177/0170840605046346Search in Google Scholar
Goddard, J., M.Tavakoli, and J.Wilson. 2005. “Determinants of Profitability in European Manufacturing and Services: Evidence from a Dynamic Panel Data.” Applied Financial Economics15(18):1269–82.10.1080/09603100500387139Search in Google Scholar
Gorton, G., and R.Rosen. 1995. “Corporate Control, Portfolio Choice, and the Decline of Banking.” Journal of Finance50:1377–420.10.1111/j.1540-6261.1995.tb05183.xSearch in Google Scholar
Greene, W. H. 2003. Econometrics Analysis. New York: Prentice Hall.Search in Google Scholar
Hausman, J. A. 1978. “Specification Tests in Econometrics.” Econometrica46:1251–71.10.2307/1913827Search in Google Scholar
Hermalin, B., and M.Weisbach. 1991. “The Effects of Board Composition and Direct Incentives on Firm Performance.” Financial Management20:101–12.10.2307/3665716Search in Google Scholar
Holderness, C. 2003. “A Survey of Blockholders and Corporate Control.” Federal Reserve Bank of New York Economic Policy Review9(1):51–63.Search in Google Scholar
Holderness, C., R.Kroszner, and D.Sheehan. 1999. “Where the Good Old Days That Good? Evolution of Managerial Stock Ownership and Corporate Governance since the Great Depression.” Journal of Finance54:435–69.10.1111/0022-1082.00114Search in Google Scholar
Jensen, M., and W.Meckling. 1976. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics3:305–60.10.1016/0304-405X(76)90026-XSearch in Google Scholar
Jeon, J., C.Lee, and C. M.Moffet. 2011. “Effects of Foreign Ownership on Payout Policy: Evidence from the Korean Market.” Journal of Financial Markets14:344–75.10.1016/j.finmar.2010.08.001Search in Google Scholar
Jeon, J., and J.Ryoo. 2012. “How Do Foreign Investors Affect Corporate Policy? Evidence from Korea.” International Review of Economics and Finance25:52–65.10.1016/j.iref.2012.05.001Search in Google Scholar
Jermias, J. 2008. “The Relative Influence of Competitive Intensity and Business Strategy on the Relationship Between Financial Leverage and Performance.” British Accounting Review40:71–86.10.1016/j.bar.2007.11.001Search in Google Scholar
Judge, G. G., W. E.Griffiths, R.Carter Hill, H.Liitkepohl, and T.-C.Lee. 1988. The Theory and Practice of Econometrics. New York: Wiley.Search in Google Scholar
Kaplan, S., and B.Minton. 1994. “Appointments of Outsiders to Japanese Boards, Determinants and Implications for Managers.” Journal of Financial Economics23:225–58.10.1016/0304-405X(94)90025-6Search in Google Scholar
Kapopoulos, P., and S.Lazaretou. 2006. “Corporate Ownership Structure and Firm Performance: Evidence from Greek Firms.” Working Paper 37, Bank of Greece.10.2139/ssrn.4162448Search in Google Scholar
Kaserer, C., and B.Moldenhauer. 2008. “Insider Ownership and Corporate Performance: Evidence from Germany.” Review of Managerial Science2:1–35.10.1007/s11846-007-0009-3Search in Google Scholar
Kinsman, M., and J.Newman. 1999. “Debt Level and Firm Performance: An Empirical Evaluation.” Paper presented at 28th Annual Meeting of the Western Decision Science Institute, 1999, Puerto Vallarta, Mexico.Search in Google Scholar
Kosmidou, K. 2008. “The Determinants of Banks’ Profits in Greece During the Period of EU Financial Integration.” Managerial Finance34(3):146–59.10.1108/03074350810848036Search in Google Scholar
Krishnan, V. S., and R. C.Moyer. 1997. “Performance, Capital Structure and Home Country: An Analysis of Asian Corporations.” Global Finance Journal8:129–43.10.1016/S1044-0283(97)90010-7Search in Google Scholar
Lee, S. 2008. “Ownership Structure and Financial Performance: Evidence from Panel Data of South Korea.” University of Utah, Department of Economics, Working Paper No. 17.Search in Google Scholar
Li, K., H.Yue, and L.Zhao. 2009. “Ownership, Institutions, and Capital Structure: Evidence from China.” Journal of Comparative Economics37:471–90.10.1016/j.jce.2009.07.001Search in Google Scholar
Liao, J., and M.Young. 2012. “The Impact of Residual Government Ownership in Privatized Firms: New Evidence from China.” Emerging Markets Review13:338–51.10.1016/j.ememar.2012.02.004Search in Google Scholar
Mak, Y. T., and Y.Li. 2001. “Determinants of Corporate Ownership and Board Structure: Evidence from Singapore.” Journal of Corporate Finance7:235–56.10.1016/S0929-1199(01)00021-9Search in Google Scholar
Margaritis, D., and M.Psillaki. 2010. “Capital Structure, Equity Ownership and Firm Performance.” Journal of Banking and Finance34(3):621–32.10.1016/j.jbankfin.2009.08.023Search in Google Scholar
McConnell, J. J., and H.Servaes. 1990. “Additional Evidence on Equity Ownership and Corporate Value.” Journal of Financial Economics27:595–612.10.1016/0304-405X(90)90069-CSearch in Google Scholar
Mehran, H. 1995. “Executive Compensation Structure, Ownership, and Firm Performance.” Journal of Financial Economics38:163–84.10.1016/0304-405X(94)00809-FSearch in Google Scholar
Minguez-Vera, A., and J. F.Martin-Ugedo. 2007. “Does Ownership Structure Affect Value? A Panel Data Analysis for the Spanish Market.” International Review of Financial Analysis16:81–98.10.1016/j.irfa.2005.10.004Search in Google Scholar
Modigliani, F., and M.Miller. 1958. “The Cost of Capital, Corporation Finance and the Theory of Investment.” American Economic Review48:261–97.Search in Google Scholar
Modigliani, F., and M.Miller. 1963. “Corporate Income Taxes and the Cost of Capital: A Correction.” The American Economic Review53:433–43.Search in Google Scholar
Morck, R., M.Nakamura, and A.Shivdasani. 2000. “Banks, Ownership Structure, and Firm Value in Japan.” Journal of Business73:539–67.10.1086/209654Search in Google Scholar
Morck, R., A.Shleifer, and R.Vishny. 1988. “Management Ownership and Market Valuation: An Empirical Analysis.” Journal of Financial Economics20:293–315.10.1016/0304-405X(88)90048-7Search in Google Scholar
Murphy, G. B., J. W.Trailer, and R. C.Hill. 1996. “Measuring Performance in Entrepreneurship Research.” Journal of Business Research36:15–23.10.1016/0148-2963(95)00159-XSearch in Google Scholar
Nunes, P. J. M., Z. M.Serrasqueiro, and T. N.Sequeira. 2009. “Profitability in Portuguese Service Industries: A Panel Data Approach.” The Service Industries Journal29:693–707.10.1080/02642060902720188Search in Google Scholar
Pasiouras, F., and K.Kosmidou. 2007. “Factors Influencing the Profitability of Domestic and Foreign Commercial Banks in the European Union.” Research in International Business and Finance21(2):222–37.10.1016/j.ribaf.2006.03.007Search in Google Scholar
Prowse, S. 1992. “The Structure of Corporate Ownership in Japan.” Journal of Finance47:1121–41.10.1111/j.1540-6261.1992.tb04007.xSearch in Google Scholar
Rao, N. V., K. H. M.Al-Yahyaee, and L. A. M.Syed. 2007. “Capital Structure and Financial Performance: Evidence from Oman.” Indian Journal of Economics and Business7:1–14.Search in Google Scholar
Seifert, B., H.Gonenc, and J.Wright. 2005. “The International Evidence on Performance and Equity Ownership by Insiders, Blockholders, and Institutions.” Journal of Multinational Financial Management15:171–91.10.1016/j.mulfin.2004.08.003Search in Google Scholar
Shleifer, A., and R.Vishny. 1986. “Large Shareholders and Corporate Control.” Journal of Political Economy94:461–88.10.1086/261385Search in Google Scholar
Short, H. 1994. “Ownership, Control, Financial Structure and the Performance of Firms.” Journal of Economic Surveys8:203–49.10.1111/j.1467-6419.1994.tb00102.xSearch in Google Scholar
Stanger, A. M. 2000. “Determinants of Home-Based Business Sales Performance.” School of Commerce Research Paper Series No: 00-18, Adelaide, Australia: Flinders University of South Australia.Search in Google Scholar
Titman, S., and R.Wessels. 1988. “The Determinants of Capital Structure Choice.” Journal of Finance43:1–19.10.1111/j.1540-6261.1988.tb02585.xSearch in Google Scholar
Turki, A., and N.Sedrine. 2012. “Ownership Structure, Board Characteristics and Corporate Performance in Tunisia.” International Journal of Business and Management7:121–32.10.5539/ijbm.v7n4p121Search in Google Scholar
Wei, Z., F.Xie, and S.Zhang. 2005. “Ownership Structure and Firm Value in China’s Privatized Firms: 1991–2001.” Journal of Financial and Quantitative Analysis40:87–108.10.1017/S0022109000001757Search in Google Scholar
White, H. 1980. “A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity.” Econometrica48:817–38.10.2307/1912934Search in Google Scholar
Williams, B. 2003. “Domestic and International Determinants of Bank Profits: Foreign Banks in Australia.” Journal of Banking and Finance27(6):1185–210.10.1016/S0378-4266(02)00251-0Search in Google Scholar
Williamson, O. E. 1967. “Hierarchical Control and Optimum Firm Size.” Journal of Political Economy75:123–38.10.1086/259258Search in Google Scholar
Williamson, O. E. 1985. The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. New York: The Free Press.Search in Google Scholar
Wooldridge, J. M. 2002. Econometric Analysis of Cross Section and Panel Data. Cambridge: MIT Press.Search in Google Scholar
Wu, S., and H.Cui. 2002. “Consequences of the Concentrated Ownership Structure in Mainland China – Evidence of Year 2000 [online].” www.ssrn.com.10.2139/ssrn.302336Search in Google Scholar
Xu, X., and Y.Wang. 1997. “Ownership Structure, Corporate Governance, and Corporate Performance: The Case of Chinese Stock Companies [online].” www.ssrn.com.Search in Google Scholar
Zeitun, R. 2009. “Ownership Structure and Corporate Performance and Failure: Evidence from Panel Data of Emerging Market the Case of Jordan.” Corporate Ownership and Control6(4):96–114.10.22495/cocv6i4p10Search in Google Scholar
Zeitun, R., and G.Tian. 2007. “Does Ownership Affect a Firm’s Performance and Default Risk in Jordan?” Corporate Governance7(1):66–82.10.1108/14720700710727122Search in Google Scholar
- 1
It is worth noting that the author has used the logarithm of the total sales and the logarithm of market capitalization in this study. However, explanatory power of the company’s total assets appears to be the most satisfactory size measure in this study.
©2014 by Walter de Gruyter Berlin / Boston
Articles in the same Issue
- Frontmatter
- Effect of Corruption on Tax Revenues in the Middle East
- The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia
- Effect of Income Elasticity on MDG Health Indicators: The Case of MENA Countries
- Corporate Governance, Capital Structure and Corporate Performance: Evidence from GCC Countries
- Book Review
Articles in the same Issue
- Frontmatter
- Effect of Corruption on Tax Revenues in the Middle East
- The Real Exchange Rate and External Competitiveness in Egypt, Morocco and Tunisia
- Effect of Income Elasticity on MDG Health Indicators: The Case of MENA Countries
- Corporate Governance, Capital Structure and Corporate Performance: Evidence from GCC Countries
- Book Review