A Study on Ownership Concentration by Family Members and Financial Performance: Evidence from India
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.
N. (2018). OWNERSHIP CONCENTRATION IMPACT ON FINANCIAL PERFORMANCE: EVIDENCE FROM
SERBIA. CONTEMPORARY ISSUES IN ECONOMICS, BUSINESS AND MANAGEMENT, 111.
H. (2013). The evolution of ownership, innovation and firm performance: Empirical
evidence from Macedonia. Available at: file:///C:/Users/User/Downloads/ABAZI_ALILI%20(2).pdf.
G., & Paletta, A. (2012). Ownership concentration and effects over firm performance:
Evidences from Italy. European Scientific Journal, 8(22), pp.39-49.
B., Iturralde, T., & Maseda, A. (2007). Ownership structure and firm performance
in non-listed firms: Evidence from Spain. Available at https://www.ehu.eus/documents/2819611/2882007/Ownership_structure_and_firm_performanc
B., & Czarnitzki, D. (2010). Ownership concentration, institutional development
and firm performance in Central and Eastern Europe. Available at: https://lirias.kuleuven.be/bitstream/123456789/286560/1/MSI_1015.pdf.
E. (2016). Ownership concentration, ownership identity and firm performance: An
empirical analysis of Dutch listed firms. Available at: http://essay.utwente.nl/70140/1/Boerkamp_BA_BMS.pdf.
L., & Gomez, S. (2011). Post privatisation private ownership concentration:
Determinants and influence on firm efficiency. Journal of Comparative Economics,
P., & Lazaretou, S. (2006). Corporate ownership structure and firm performance:
Evidence from Greek firms. Available at: http://www.bankofgreece.gr/BogEkdoseis/Paper200637.pdf.
Porta, R., Lopez-de-slanes, F., Shleifer, A., & Vishny, R. (1999). Corporate
ownership around the world. Journal of Finance, 54, pp.471-518.
B., & Marić, S. (2015). The Nature of Corporate Governance and Performance in
the Conditions of Ownership Concentration. Industrija, 44(1), pp.45-61.
V., & Spatareanu, M. (2006). Ownership concentration, market monitoring and
performance: Evidence from the UK, the Czech Republic and Poland. Journal of Applied
Economics, 9(1), pp.91-104.
D., Dietl, H., & Peev, V. (2004). Ownership, control and performance in large
Bulgarian firms. Available at: file:///C:/Users/User/Downloads/Ownership_control_and_performance_in_large_Bulgari.pdf.
J., Babić, V., & Erić, J. (2013). Ownership structure and corporate financial
performance in Serbia: empirical evidence. Actual Problems of Economics, 9(147),
F., Rossi, G., & Rovetta, B. (2008). Does ownership structure affect performance?
Evidence from the Italian market. Corporate Governance, 16(4), pp.312-325.
M., Pervan, I., & Todoric, M. (2012). Firm ownership and performance: Evidence
for Croatian listed firms. International Journal of Social, Behavioral, Educational,
Economic, Business and Industrial Engineering, 6(1), pp.81-87.
M. (2014). Ownership structure and firm performance: Evidence from the Netherlands.
Available at: http://essay.utwente.nl/65381/1/scholten_BA_MB.pdf.
A. (2010). Ownership, board structure and corporate performance: Evidence of French
Vc- Backed firms. Corporate Board: Role, Duties & Composition, 6(3), pp.7-20.