Please use this identifier to cite or link to this item: https://hdl.handle.net/1959.11/7507
Title: Co-deterministic relationship between ownership concentration and corporate performance: Evidence from an emerging economy
Contributor(s): Farooque, Omar  (author)orcid ; van Zijl, Tony (author); Dunstan, Keitha (author); Karim, Akm Waresul (author)
Publication Date: 2010
DOI: 10.1108/10309611011073250
Handle Link: https://hdl.handle.net/1959.11/7507
Abstract: Purpose – The purpose of this paper is to test whether dominant shareholder(s) of a firm enhance performance in Bangladesh and thus examines the arbitrary moves by the regulatory bodies, in the name of promoting "good corporate governance", to restrict ownership concentration. Design/methodology/approach – Building on the established literature, a simultaneous equations approach is applied to model the relationship between ownership concentration and performance and is tested on a sample of 567 observations on firms listed on the Dhaka Stock Exchange over a seven-year period. The two equations model consists of firm performance and ownership concentration as endogenous variables along with other governance variable. Findings – The results suggest a significant positive co-deterministic relationship between ownership concentration and firm performance indicating that ownership concentration and firm performance simultaneously impact each other. It suggests that the ownership restriction imposed by the Securities and Exchange Commission is unjustified and detrimental to firm performance/growth in emerging countries such as Bangladesh. Practical implications – This new evidence from an emerging market enhances our understanding of corporate governance in Asian countries. The study has implications for stakeholders, regulators and policy makers to revisit their attempt to limit founder-family ownership holdings. Instead, their aim should be to balance the home-grown unique features, such as a Top-1 dominant shareholder, with Western governance mechanisms. Originality/value – The paper is the first to consider Top 1 shareholder's ownership as the measure of ownership concentration, which is an important feature of the corporate sector in emerging markets. In emerging markets, founder-family ownership concentration acts as an alternative governance mechanism substituting for strong and effective legal backing and other market-driven monitoring mechanisms.
Publication Type: Journal Article
Source of Publication: Accounting Research Journal, 23(2), p. 172-189
Publisher: Emerald Publishing Limited
Place of Publication: United Kingdom
ISSN: 1839-5465
1030-9616
Fields of Research (FoR) 2008: 150303 Corporate Governance and Stakeholder Engagement
Socio-Economic Objective (SEO) 2008: 910402 Management
Peer Reviewed: Yes
HERDC Category Description: C1 Refereed Article in a Scholarly Journal
Appears in Collections:Journal Article

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