DOES THE EXTENT OF OWNERSHIP BY DIFFERENT SHAREHOLDERS ENHANCE FIRM FINANCIAL PERFORMANCE? EMPIRICAL EVIDENCE FROM AN EMERGING ECONOMY

Abstract

Purpose- The aim of this paper is to examine the role of institutional, foreign, and government shareholding in enhancing financial performance of listed companies in the Dhaka Stock Exchange (DSE) of Bangladesh. Methodology- The study is based on 110 manufacturing companies listed on Dhaka Stock Exchange (DSE) during the period of 2013-2017 which produces 512 firm-year observations. The study investigates the impact of the extent of ownership of different shareholders (namely institutions, foreigners, the government) on financial performance (as measured by return on assets, earnings per share and return on sales) of firms by conducting multivariate analysis using Pooled Ordinary Least Square regression along with year dummy, lag model and serial correlation. Findings- The results of multiple regression analysis reveal that institutional and foreign ownership are significantly and positively associated with three proxies of firm performance. This study also finds that government ownership doesn’t have any significant impact on firm performance in Bangladesh. Conclusion- The study considers earnings per share as one of the corporate performance indicators which is widely used by fund providers in financial markets but seldom analyzed in the literature. The study will provide valuable insights to investors, regulators, and managers who want to understand how the extent of ownership by different shareholders drive different firm performance measures. The study analyzes only non-financial companies and does not incorporate market performance in the analysis of the hypothesized relationship among the variables.

Keywords

• Corporate governance
• shareholding patterns
• ownership structure
• firm performance
• agency theory

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