OWNERSHIP STRUCTURE AND COMPANY’S PERFORMANCE

Abstract

Because of intense competition, companies need to maintain a competitive edge by having stable financial growth to thrive in the market. For this purpose there is a need to assess how different ownership types affect profitability and growth of the company. Hence, many researchers have carried out several studies to explain phenomena of the relationship of ownership structure and how it impacts the profitability of firms. Corporate governance plays an important role due to the fact that it links between shareholders, management and board (Abeyrathna & Ishari, 2016). Soufeljil, Sghaier, Kheireddine, and Mighri (2016) reviewed that corporations are business entities producing certain goods or services which aim at achieving profitability, financial growth and expansion. This area of research has great implication for corporations on how to achieve sustained growth by understanding the effect of different types of ownerships like concentrated ownership, family ownership, managerial ownership, governmental ownership, institutional ownership, insider ownership, block holding etc. affect on the profitability of firm and how different measures of performance like ROE, ROI, ROA and Tobin’s Q are used to determine the given relation and relevance of agency theory in analyzing the relationship. Studies suggest that there is still a necessity for further research in this area to fill the loop holes and reach a common ground on the topic of understanding the relationship between ownership structure and firm’s performance in terms of growth, profitability and expansion. Majority of researchers have consensus on the opinion that different types of ownership structure are great determinants of a firm's performance