Open Access Peer-reviewed

An Empirical Investigation of the Relationship between Corporate Ownership Structures and their Performances (Evidence from Tehran Stock Exchange)

Mohammad Namazi1,, Ehsan Kermani1

1Department of Accounting, College of Economics, Management and Social Science, Shiraz University, Shiraz, Iran

Journal of Finance and Accounting. 2013, 1(1), 13-26. DOI: 10.12691/jfa-1-1-2
Published online: August 25, 2017

Abstract

This study investigates the effects of ownership structure on the performance of the listed companies in the Tehran Stock Exchange (TSE). Consequently, a main hypothesis is presented, which states that there is a significant relationship between companies' ownership structures and their performances and then five sub-hypotheses are provided. For testing the hypotheses, the statistical panel data technique is employed. For testing each hypotheses, 4 accounting and economics performance evaluation variables models based on different ownership structures are established. The statistical population includes 66 companies in the period between 2003-2008. Based on the research results, all hypotheses except the fourth one, were confirmed. The findings revealed a significant negative relationship between the institutional ownership and companies' performances; and the relationship between corporate ownership and companies' performance generally was significantly positive. Management ownership, however, would affect the performance significantly and negatively. For foreign ownership, there was no information that would indicate ownership of the foreign investors in our samples companies. With respect to the company ownership, just in the models based on the accounting variables (i.e., ROA and ROE) coefficients are significant and negative. But in the models based on the market variables (i.e., Q-Tobin and MBVR) coefficients are not significant. In general, there was a significant relationship between companies' ownership structures and their performances.

Keywords:

ownership structure, corporate governance, Tehran Stock Exchange (TSE), panel data, performance evaluation
[1]  Abdel-Khalik, R. and B.B. Ajinkia, 1979. Empirical Research in Accounting: A Methodological Viewpoint. American Accounting Association, USA., Pages: 125.
 
[2]  Ahmadzadeh, M., R. Noori, M.R. Asfidani and M. Akbari, 2005. The investigation of the capital structure and financial resources of the Keshavari bank and offering a way for optimizing it. Accounting and Auditing Review No. 39, pp: 3-29.
 
[3]  Anderson, R.C. and D.M. Reeb, 2003. Founding-family ownership and firm performance: Evidence from the S&P 500. J. Finance, 58: 1301-1328.View Article
 
[4]  Aoki, M. and H.K. Kim, 1995. Corporate Governance in Transitional Economies: Insider Control and the Role of Banks. The World Bank, Washington, DC., USA., Pages: 467.
 
[5]  Aydin, N., M. Sayim and A. Yalama, 2007. Foreign ownership and firm performance: Evidence from Turkey. Int. Res. J. Finance Econ., 11: 103-111.
 
[6]  Baiman, S., 1990. "Agency Research in Managerial Accounting: A Second Look", Accounting, Organizations and Society, 15(4), pp. 314-371.View Article
 
[7]  Baltagi, B.H., 2005. Econometric Analysis of Panel Data. 3rd Edition., Wiley Publishers, UK., Pages: 314
 
[8]  Barbosa, N. and H. Louri, 2002. On the determinants of multinationals’ ownership preferences: Evidence from Greece and Portugal. Int. J. Ind. Organiz., 20: 493-515.View Article
 
[9]  Bhagat, S., 1983. The effect of pre-emptive right amendments on shareholder wealth. J. Financial Econ., 12: 289-310.View Article
 
[10]  Bianco, M. and P. Casavola, 1999. Italian corporate governance: Effects on financial structure and firm performance. Eur. Econ. Rev., 43: 1057-1069.View Article
 
[11]  Chen, M.Y., 2005. Group affiliation, identity of managers and the relation between managerial ownership and performance. Int. Rev. Financial Anal., 14: 533-558.View Article
 
[12]  Cheung, J.K., J.B. Kim and J. Leey, 1999. The impact of institutional characteristics on return-earnings associations in Japan. Int. J. of Accounting, 34: 571-596.View Article
 
[13]  Cornett, M.M., A.J. Marcus and H. Tehranian, 2008. Corporate governance and pay-for-performance: The impact of earnings management. J. Financial Econ., 87: 357-373.View Article
 
[14]  Cornett, M.M., A.J. Marcus, A. Saunders and H. Tehranian, 2007. The impact of institutional ownership on corporate operating performance. J. Banking Finance, 31: 1771-1794.View Article
 
[15]  Dougherty, C., 2004. Introduction to Panel Data Models. In: Introduction to econometrics, Dougherty, C. (Ed.). Chapter 14. Oxford University Press, USA., pp: 408-423. PubMed
 
[16]  Douma, S., R. George and R. Kabir, 2006. Foreign and domestic ownership, business groups and firm performance: evidence from a large emerging market." Strategic Management Journal. Vol. 27, pp. 637-657.View Article
 
[17]  Earle, J.S., 1998. Post-privatization ownership structure and productivity in Russian industrial enterprises. Site Working Paper No. 127, Stockholm School of Economics, Central European University.
 
[18]  Elyasiani, E. and J.J. Jia, 2008. Institutional ownership stability and BHC performance. J. Banking Finance, 32: 1767-1781.View Article
 
[19]  Enqvist, J., 2005. Managerial ownership, controlling shareholders and firm performance.
 
[20]  Fernando, C.S., V.A. Gatchey and P.A. Spindt, 2007. Institutional ownership, share price levels and the value of the firm.
 
[21]  Habib, M.A. and A. Ljungquist, 2000. Firm value and managerial incentives: A stochastic frontier approach. London Business School Working Paper.
 
[22]  Habib, M.A. and A. Ljungquist, 2003. Firm value and managerial incentives: A stochastic frontier approach.
 
[23]  Hasasyeganeh, Y. and A. Pouria Nasab, 2005. The role of the institutional investors in the corporate governance of the corporations", Hesabdar, Year 19, No. 4, pp. 24, 28, 47-48, 57-59 and 64-65.
 
[24]  Halpern, P., R. Kieschnick and W. Rotenberg, 2005. Managerial shareholdings, firm value and acquired corporations. Q. Rev. Econ. Finance, 45: 781-795.View Article
 
[25]  Heracleous, L., 1999. Privatisation: Global trends and implications of the Singapore experience. Int. J. Public Sector Manage., Vol. 12, No. 5, pp. 432-444.View Article
 
[26]  Hill, N.T. and K. Stevens, 1999. CEO compensation and corporate returns: 1991 to 1996. University of DePaul, USA., pp: 1-14.
 
[27]  Himmelberg, C.P., R.G. Hubbard and D. Palia, 1999. "Understanding the determinants of managerial ownership and the link between ownership and performance." The Journal of Financial Economics, Vol. 53, pp. 353-384.View Article
 
[28]  Imam, M.O. and M. Malik, 2007. Firm performance and corporate governance through ownership structure: Evidence from Bangladesh stock market. Int. Rev. Bus. Res. Papers, 3: 88-110.
 
[29]  Jensen, M.C. and K.J. Murphy, 1990. Performance pay and top management incentives. J. Political Econ., 98: 225-264.View Article
 
[30]  Jensen, M.C. and W.H. Meckling, 1976. "Theory of the firm: managerial behavior, agency costs and ownership structure." Journal of Financial Economics, Vol. 3, No. 4, pp. 305-360.View Article
 
[31]  Kapopoulos, P. and S. Lazaretou, 2007. Corporate ownership structure and firm performance: Evidence from Greek firms. Corporate Governance: An Int. Rev., Vol. 15, No. 2, pp. 144-158.
 
[32]  Khan, A.R., B. Balachandran and P. Mather, 2007. Managerial share ownership and firm performance: Evidence from Australia. Proceedings of the AFAANZ Conference, July 1-3, 2007, Gold Coast, Australia.
 
[33]  Krivogorsky, V., 2006. Ownership, board structure and performance in continental Europe. The Int. J. Account., Vol. 41, pp. 176-197.View Article
 
[34]  Kumar, J., 2004. Agency theory and firm value in India. Soc. Sci. Res. Network.
 
[35]  Mahdavi, A. and A. Maydari, 2005. Ownership structure and the efficiency of the active firms in the Tehran securities exchange. J. Econ. Res., 71:103-132.
 
[36]  Mashayekh, S. and M. Esmaele, 2006. An investigation of the relationship between quality of the profit and some aspects of the strategic principles for the firms accepted in the Tehran securities exchange. Account. Auditing Rev., 45: 25-44.
 
[37]  Mathiesen, H., 2002. Managerial ownership and financial performance. Ph.D. Thesis, Department of International Economics and Management, Copenhagen Business School.
 
[38]  McConaughy, D.L., C.H. Matthews and A.S. Fialko, 2001. Founding family controlled firms: Performance, risk and value. J. Small Bus. Manage., Vol. 39, No. 1, pp. 31-49.View Article
 
[39]  Mishra, C.S., T. Randqy and J.I. Jenssen, 2001. The effect of founding family influence on firm value and corporate governance. J. Int. Finan. Manage. Accounting, Vol. 12, No. 3, pp. 235-259.View Article
 
[40]  Mokarami, Y., 2006. The strategic mechanism principles of the corporations. Hesabras, Year 8, No. 32, pp. 40-45.
 
[41]  Mueller, E. and A. Spitz-Oener, 2006. Managerial ownership and company performance in german small and medium-sized private enterprises. German Econ. Rev., 7:223-247.View Article
 
[42]  Murphy, J.K., 1985. Corporate performance and managerial remuneration: an empirical analysis. J. Account. Econ., 7: 11-42.View Article
 
[43]  Namazi, M., 1985. Theoretical developments of principal-agent employment contract in accounting: The state of the art. J. Account. Literature., 4: 113-163.
 
[44]  Namazi, M. and J. Shirzadeh, 2005. An investigation of the relationships between capital structure with profitability of the accepted firms in the Tehran securities exchange", Accounting and Auditing Journal, No. 42, pp. 97-124.
 
[45]  Nowravesh, I. and A. Ebrahimi Kordlar, 2005. The investigation and determination of the relationshps between the structure of the stockholders with information and the usefulness of accounting performance measures. Accounting and Auditing Review, No. 42, pp. 97-124.
 
[46]  OECD, 1998. OECS economic surveys of the Netherlands, Paris. OECD Pendict.
 
[47]  Omran, M.M., A. Bolbolb and A. Fatheldinb, 2008. Corporate governance and firm performance in Arab equity markets: Does ownership concentration matter?. Int. Rev. Law Econ., 28: 32-45.View Article
 
[48]  Phillips, P.C.B., 1986. Understanding spurious regressions in econometrics. J. Econometrics, 33,311-340.View Article
 
[49]  Pindyck, R.S. and D.L. Rubinfeld, 2001. Econometric Models and Economic Forecasts. 4th Edition., McGraw-Hill, New York, USA.
 
[50]  Prowse, S.D., 1994. Corporate Governance in an International Perspective: a survey of corporate control mechanisms among large firms in the United States, the United Kingdom, Japan and Germany. Vol. 4, BIS, Basle, Switzerland, Pages: 82
 
[51]  Poorhaydari, O. and D. Hematy, 2004. Search for the effects of liability contracts, political cost, incentive plans and ownership on management profit in exchange. Listed Firms of the Tehran Securities, Accounting and Auditing Review No. 36, pp: 47-63.
 
[52]  Rahchamani, A., 2006. Management of the insurance firms after the privatization period: The role of ownership structures and the extent of investors’ supports. The Quarterly Publication of Asia, pp: 30-36.
 
[53]  Rahman Seresht, H.R. and N. Mazloomi, 2005 The relationship between managerial performance of the institutional investors with their shares for the firms accepted in the Tehran securities exchange. Manage. Stud., 47: 135-160.
 
[54]  Randoy, T. and S. Goel, 2003. Ownership structure, founder leadership and performance in Norwegian SMEs: Implications for financing entrepreneurial opportunities. J. Bus. Vent., 18: 619-637.View Article
 
[55]  Rose, C., 2005. Managerial ownership and firm performance in listed Danish firms: In search of the missing link. Eur. Manage. J., 23: pp. 542-553.View Article
 
[56]  Sinaie, H.A., 2007. The investigation of the effects of internal factors on the formation of the capital structure of the firms accepted in Tehran securities exchange. Account. Audit. Rev., 48: 63-84.
 
[57]  Sinaie, H. and A. Rezaian, 2005. The investigation of the characteristics of the firms on the structure of the capital (financial leverage). Research Publication of the Humanities and Social Sciences of Mazandran University, No. 19, pp: 123-148.
 
[58]  Shleifer, A. and R.W. Vishny, 1997. "A Survey of Corporate Governance." The Journal of Finance, Vol. 52, No. 2, pp. 737-83.View Article
 
[59]  Smith, M., 2011. Research Methods in Accounting. 2nd Edition., Sage Publication Ltd., London, UK., ISBN-13: 9781849207973, Pages: 240. PubMed
 
[60]  Tsai, H. and Z. Gu, 2007. The relationship between institutional ownership and casino firm performance. Int. J. Hosp. Manage., 26, 517-530.View Article
 
[61]  Wang, D., 2006. Founding family ownership and earning quality. J. Account. Res., 44: 619-656.View Article
 
[62]  Wolfe, J., 2003. The TOBIN’<i>q</i> as a company performance indicator. Dev. Bus. Simul. Exp. Learn., 30, 155-160.
 
[63]  Xu, X. and Y. Wang, 1997. Ownership structure, corporate governance and firms’ performance: The case of Chinese stock companies. World Bank Policy, Research Working Paper, No.1794.