Corporate ownership structure and financial performance

Increased attention is given in recent years to the issue prevailing between the corporate ownership structure and financial performance as a result of that certain structure. A number of studies have been carried out in this regard that assessed at the corporate level the relationship of ownership structure and financial performance.

ROA can be used as a measure to assess the relationship of ownership concentration and performance of the firm. The researchers concluded from study the relationship to be statistically significant and positive. Also, the firm performance has a positive impact from the institutional investors’ ownership as well as from the foreign investors. Further testing revealed that the sizes of the audit committee and board of directors, as well as institutional and managerial ownership, affect financial performance.

It was noted that there were higher improvements in the environmental performance as compared to that to other ownership types when the state of ownership increases even when it is more likely that the ownership is retained in industries that are high-polluting.        

There is a positive relationship between financial performance with family ownership, institutional ownership, and managerial ownership. However, no significant relationship exists between financial performance and foreign ownership. It is possible to maximize value and gain sufficient control rights over the company using the concentrated ownership as it becomes manageable to effectively monitor and as a result improvements in the performance of the firm is seen because of reduction in agency costs. The ownership structure significantly relates to financial performance. It is found from the study that included a sample of banks operating in Kenya that ownership structure has effects on performance as well as on institution management. Also, the same study shows that there is a significant and positive relationship between ownership structure and financial performance. According to this study, banks having foreign investor perform better than the banks having a domestic investor. Researchers divided the assessment into two groups based on different criteria for the groups i.e. market and accounting.

Assessment based on accounting criterion reveals that business performance has no significant effects of the ownership structure as seen from findings. On the other hand, assessment based on market criterion reveals that the ownership structure significantly affects business performance.

Corporate performance is affected by foreign ownership in a positive and significant manner as concluded when assessing the relationship between two variables. This is particularly analyzed for India where there is sufficient corporate governance by foreigners in the firm’s internal system. Impact of various categories of ownership on the corporate performance shows that foreign ownership and corporate performance are related in a significantly positive manner and that the foreign investors can facilitate easy access to massive resources and management system enhancement.