Ownership Structure and Firm Performance: Evidence from Pakistan Stock Exchange Listed Firms

Firm performance always remained an area of interest for all stakeholders including stockholders, creditors, management, government, suppliers, etc. So far, several internal and external factors that contribute to the performance of a firm, have been identified by the researchers. Along with different external factors, the ownership structure is also considered an important factor contributing to firm performance. Various studies have found that the relation between ownership structure and firm performance is not straightforward. This relation is influenced by a number of other factors. The decision-making of a firm is affected by the ownership structure, based on the level of control different owners have over the organization. While conducting the research, the researcher has considered other factors like retention ratio, increase in debt level and firm’s size along with the different dimensions of ownership structure. This study has adopted the quantitative approach to study and analyze the relation between the selected variables in the model. The data has been collected from annual reports of different manufacturing companies. Stata software has been used to analyze the data. The findings of the study are mixed; stating that family and institutional ownership have a significant impact on the firm performance in the presence of the control variables (retention ratio, increase in debt level, and firm size) leading to the fact that firms with concentrated ownership tend to perform better in Pakistan as controlling shareholders have stronger incentive for controlling and monitoring the performance of the management team.