THE NON-LINEAR EFFECTS OF OWNERSHIP STRUCTURE ON CORPORATE PERFORMANCE: EVIDENCE FROM EMERGING MARKET

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Rami Zeitun ORCID logo

https://doi.org/10.22495/cocv7i2p8

Abstract

This paper examines the non-linear effects of ownership structure (variables) on corporate performance. The data used in this study are derived from 167 publicly traded companies quoted on the Amman Stock Exchange (ASE), over the period 1989-2006. The ownership structure is measured by the percentage of shares held by each type of owner (state, institution, foreign concentrated owners, and individuals). Results in this study confirm earlier findings of a curvilinear relationship reported for larger markets. The results also show that the relationship between government ownership and ROA and MBVR is a hump-shaped curve. The value of a firm increases when government ownership is low, but the value of a firm decreases when it is high. As the government reduces its stake in a privatised company to below a specific point, perhaps market monitoring become ineffective and this increases the agency costs. The results also document that the relation between institutional ownership and ROA and Tobin’s Q is a hump-shaped curve. When institutional ownership increases above a specific point, institutional shareholders negatively influence a firm’s activities. Findings in this study contribute to the growing body of international evidence that the non-linear cubic relationship between ownership structure and corporate performance is robust to differences in governance structures across markets.

Keywords: Ownership Structure, Corporate Performance, Failure, Jordan

How to cite this paper: Zeitun, R. (2009). The non-linear effects of ownership structure on corporate performance: evidence from emerging market. Corporate Ownership & Control, 7(2), 104-116. https://doi.org/10.22495/cocv7i2p8