Ownership concentration is stated by the number of large-block shareholders
and if the percentage of firm's shares owned by the family members then that makes
them as Family owned firms. They form the backbone
of Indian economies, as they contribute towards GDP of country. Therefore, family
business management is an emerging area of academic interest. In this regard, this
empirical research deals with the analysis of relationship between concentrated
ownership by the family members and its impact on financial performance, measured
by the Return on Asset (ROA) and Return on Equity (ROE). The present study analyses
the performance of Indian family businesses for firms listed on BSE 500 Index for
a period of 2016-2018. An equity ownership above 20% by family members, also the
family member as a chairman of the board and multiple generations or multiple members
actively involved in business has been identified as family owned business. Using
a representative sample of 375 Indian family owned businesses out of BSE 500 Index.
Statistical analysis of collected data includes descriptive statistics, determination
of the correlation coefficient between ownership concentration and financial performance,
multiple OLS regression analysis to determine the impact of ownership concentration
on financial performance. The results show that there is a U-shaped relationship
between ownership concentration and performance, which indicates that the increase
in ownership concentration to a certain limit of 55% positively affects financial
performance. When ownership concentration exceeds 55%, financial performance deteriorates.
Concentration, Family owned Business, Corporate Governance, Shareholders, Equity
and Financial Performance.
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