Ownership concentration impact on the firm performance: Evidence from the manufacturing and services industrial sector

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Abstract

The influence of the ownership concentration components of the manufacturing and service companies listed on the Indian National Stock Exchange (NSE) 500 Index is examined in this study. The utilization of stronger regression methods including the ordinary least square (OLS) regression and fixed effects model (FEM) along with the random effects model (REM) indicate that the shares held by the promoter corporate bodies and Indian and foreign promoters did not significantly affect the overall performance of the firm (as measured by Tobin’s Q and return on assets (ROA)). However, the performance of the company as a whole is negatively impacted by the shares pledged by the promoter corporate bodies, as well as by the foreign and Indian promoters (as evaluated by Tobin’s Q and ROA). These shareholdings are used as security by the promoters to reduce their costs and this has been reflected in the shareholdings of the promoters.

Keywords: Ownership Concentration, Firm Performance, Tobin’s Q, ROA, India, Promoters

Authors’ individual contribution: Conceptualization — H.N. and T.A.; Methodology — H.N.; Software — A.O.; Validation — L.R. and A.O.; Formal Analysis — L.R.; Investigation — H.N.; Data Curation — A.O.; Writing — Original Draft — H.N.; Writing — Review & Editing — T.A.; Visualization — T.A.; Supervision — G.A. and A.R.; Project Administration — G.A. and A.R.; Funding Acquisition — G.A. and A.R.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G32, G38, G00, L5, L60

Received: 23.08.2024
Accepted: 07.12.2024
Published online: 10.12.2024

How to cite this paper: Naim, H., Rani, L., Omair, A., Aziz, T., Ahmed, G., & Rafiuddin, A. (2024). Ownership concentration impact on the firm performance: Evidence from the manufacturing and services industrial sector. Corporate Ownership & Control, 21(4), 28–40. https://doi.org/10.22495/cocv21i4art3