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The Relationship Between Ownership Structure and Performance: Evidence from the Iranian Stock Market

Kouhi, Elham | 2021

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 55087 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Ebrahimnejad, Ali
  7. Abstract:
  8. Pyramidal and network ownership structures that provide ultimate owners with more control over companies are common in the Iranian stock market. Given the multi-layered shareholding networks and the significant changes that have occurred in the ownership structure of large Iranian companies in the last two decades, the purpose of this study is to investigate the relationship between ownership structure and performance of companies. To achieve this purpose, ownership structure is examined using four measures; cash flow right of the largest shareholder, the wedge between control right and cash flow right of the largest shareholder, difference in cash flow rights of the largest two shareholders, and type of ownership. Next, its relationship with performance and stock returns of 261 listed companies is explored during the period 1394 to 1398. Testing the research hypotheses using the panel regressions with fixed effects we find a positive and significant relationship between the cash flow right of the largest shareholder and firm performance with a 15% ownership threshold, but in the ownership structure of firms with only one owner and less than 50% in control rights, there is no significant relationship between the cash flow right of the largest shareholder and performance. We find no relationship between the deviation between control right and cash flow right of the largest shareholder and also difference between cash flow rights of the largest shareholders and firm performance. As for the type of ownership, the ownership of insurance companies has a positive relationship with firm performance, while quasi-governmental ownerships have a negative relationship with performance. At the 15% ownership threshold, we find no relationship between variables of ownership and stock returns, with the exception of companies with insurance ownership. However, when we change the threshold to 20%, the cash flow right of the largest shareholder has a positive significant relationship with stock return among firms with multiple large shareholders and none of them have no more than 50% control right and a negative significant relationship is found between difference of the cash flow rights of the largest shareholders and stock return. Bank, investment companies, and quasi-governmental ownership types have a negative relationship with stock return at a threshold of 20%
  9. Keywords:
  10. Ownership Structure ; Pyramidal Shareholding ; Stock Return ; Firm's Performance ; Stock Market ; Ownership Type

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