Share holding Pattern and Firm Performance

Abstract

Corporate Governance deals with the issue of how suppliers of finance to corporations assure themselves of getting a return on their investment. Several Studies have examined the relationship between ownership structure and firm performance. Using di erent data samples most of the studies provide general support for the argument that increase in managerial ownership increases firm performance. However, these results have been questioned recently. This study examines empirically the effects of ownership structure on the firm performance for a large sample of Indian Corporate Firms, from an `agency perspective'. We examine the effect of interactions between corporate, foreign, financial institutions, and managerial ownership on firm performance. We provide empirical evidence, which suggests that firm size and age in positively related to the firm performance. Using panel data framework, we show that a large fraction of cross-sectional variation, in firm performance, found in several studies, is explained by unobserved firm heterogeneity, rather than the ownership structure. We do not find any evidence that the differences in ownership structure, affect firm performance; after controlling for observed firm characteristics and firm fixed effects.corporate governance, shareholding pattern and firm performance