Ownership Structure & Corporate Performance: An investigation on the Textile Sector of Bangladesh

1. Introduction
In organizations where owners, that are the stockholders, are not involved in day to day operations, a potential conflict of interest may arise since stockholders of these organizations permit managers to make decisions as to how organizations are run. Of course, the stockholders want the managers to make decisions that are consistent with the goal of wealth maximization. However, managers concerns can potentially conflict with the shareholders interest as they are not the owners of the organizations (Jensen and Meckling, 1976; Shleifer and Vishny, 1997). Such conflict of interest is known as agency problem which has been the subject of an import and ongoing debate in the corporate finance literature. According to Shleifer and Vishny shareholders interest, being the residual claimant, can be protected only through the institutions of corporate governance while the interest of other investors can generally be protected through contractual arrangements between the company and concerned stakeholders. Since ownership structure remains the basis for exercising power and control over corporate entities under conditions of market imperfections, the problem of agency costs needs to be addressed according to the ownership structure of the firm to ensure efficient financial performance. For a publicly traded firm with widely dispersed shareholdings, the challenge for shareholders is to control the behavior of dominating managers or of the board. On the other hand, the challenge for a closely held firm with a controlling shareholder and a small number of outside minority shareholders or a widely held firm dominated by a controlling shareholder is how outside shareholders can prevent the controlling shareholder from extracting excess benefits to the detriment of minority shareholders (World Bank, 1999). Therefore, to ensure optimum performance and minimize agency costs, ownership structure is considered to be one of the core governance mechanisms along with others such as, debt structure, board structure, incentive-based compensation structure, dividend structure, and external auditing. Over the years, different researchers had carried out researches to find out the relation between ownership structure and firms performance in order to suggest the optimum situation and we can see that there are arguments both in favor of the direct relation and in favor of no direct relation between them. Since very few of these researches was conducted in the context of emerging market economy like Bangladesh, in this paper I try to find out the relationship between ownership structure and corporate performance from the firms listed in DSE (Dhaka Stock Exchange) of textile industry based on the approach followed by Rami Zaitun1 who also conducted the same on the firms of Jordan another emerging market. The remainder of this paper is structured as follows: Section 2 briefly examines the literature that investigate the ownership and performance relationship. Section 3 highlights the capital structure in the textile industry of Bangladesh Section 4 details the research methodology and data while Section 5 describes the results of empirical testing. Finally, Section 6 provides the conclusions of the paper.

Assistant professor of finance in the Finance Discipline, Department of Finance and Economic, College of Business and economic, Qatar University.

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Ownership Structure & Corporate Performance: An investigation on the Textile Sector of Bangladesh

2. Literature Review
The underlying problems of corporate governance in a world of incomplete contracts are well documented. The separation of ownership and control of the private corporation gives rise to a principal-agent problem, which can result in the sub-optimal use of capital (Stiglitz and Edlin, 1995 and Shleifer and Vishny 1998). In an environment of highly dispersed ownership, the individual shareholder has little or no incentive to monitor management. As monitoring is a costly procedure, the marginal cost of monitoring often exceeds the marginal benefits of improved performance. Monitoring becomes a public good, as every shareholder benefits from the monitoring activities of others (Stiglitz, 1982). The issue was first addressed by the Berle and Means (1932) thesis, which suggests that an inverse correlation should be observed between the diffuseness of shareholdings and firm performance. Their view has been challenged by Demsetz (1983) , who argues that the ownership structure of a corporation should be thought of as an endogenous outcome of decisions that reflect the influence of shareholders and of trading on the market for shares. When owners of a privately held company decide to sell shares, and when shareholders of a publicly held corporation agree to a new secondary distribution, they are, in effect, deciding to alter the ownership structure of their firms and, with high probability, to make that structure more diffuse. Subsequent trading of shares will reflect the desire of potential and existing owners to change their ownership stakes in the firm. In the case of a corporate takeover, those who would be owners have a direct and dominating influence on the firms ownership structure. In these ways, a firms ownership structure reflects decisions made by those who own or who would own shares. The ownership structure that emerges, whether concentrated or diffuse, ought to be influenced by the profit-maximizing interests of shareholders, so that, as a result, there should be no systematic relation between variations in ownership structure and variations in firm performance. The empirical studies Demsetz and Lehn (1985) provide evidence of the endogeneity of a firms ownership structure argued for by Demsetz (1983) and also assess the validity of the Berle and Means thesis: A linear regression of an accounting measure of profit rate on the fraction of shares owned by the five largest shareholding interests and on a set of control variables , in which ownership structure is treated as an endogenous variable, gives no evidence of a relation between profit rate and ownership concentration. Morck et al. (1988) ignore the endogeneity issue altogether and re-examine the relation between corporate ownership structure and performance. Like Demsetz and Lehn (1985), they find no significant relation in the linear regressions they estimate using Tobins Q and accounting profit rate as alternative measures of performance. However, they also estimate a piecewise linear regression of Tobins Q on insider ownership, and this does provide evidence of a non-monotonic relation. Thus, in the literature, there are alternative views on the relationship between ownership and performance. One approach assumes an exogenous optimal ownership structure that combines with other governance mechanisms to collectively maximize firm value. The other approach assumes that firms choose a

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Ownership Structure & Corporate Performance: An investigation on the Textile Sector of Bangladesh

combination of ownership structure and other governance mechanisms to maximize performance while recognizing that ownership is itself affected by performance, that is, it is endogenous. Accordingly, empirical studies addressing the relationship between ownership structure and performance provide two opposite and contradictory views on the role of ownership. Assuming ownership is exogenous and applying ordinary least squares, one group of studies provides evidence of either a linear or a non-linear relationship between ownership and performance. The other group assumes ownership and performance to be endogenous and applies two-stage least-squares (2-SLS) or three-stage least-squares (3-SLS) to a set of simultaneous equations and finds either no evidence of a systematic relationship between the variables or a reverse causality between them. A reverse causality finding implies that performance determines ownership structure, and not the other way around. The former group of studies supports either the interest alignment hypothesis (Berle and Means, 1932; Jensen and Meckling, 1976; Hart and Holmstrom, 1987; Morck et al., 1988) or the entrenchment hypothesis (Fama and Jensen, 1983 a & b; Morck et al., 1988) or both. The latter group supports the natural selection hypothesis (Demsetz, 1983; Demsetz and Lehn, 1985; Kole and Lehn, 1997) or the mutual neutralization hypothesis (Jensen, 1986). Some of the studies that identify reverse causality argue in favor of the reward hypothesis (Kole, 996), the insider-reward hypothesis (Cho, 1998) and the insider-investment hypothesis (Loderer and Martin, 1997). In the empirical literature, Loderer and Martin (1997) consider Tobins Q and managerial ownership as endogenous in a simultaneous equations framework and use data on acquisitions to investigate whether executive stock ownership boosts the performance of the bidding firms. Using 2-SLS regression, they find no evidence that larger managerial ownership boosts performance. In contrast, performance appears to have a negative effect on executive stockholdings. Cho (1998) confirms a reverseway causality relationship between ownership and performance. He focuses on the hypothesis that insider ownership affects investment (capital expenditure, R&D), which in turn affects corporate performance (Tobins Q). Using simultaneous equations to model endogeneity, he uses cross-sectional 2-SLS regressions and finds that investment positively affects corporate value, which in turn affects insider ownership. Demsetz and Villalonga (2001) also address endogeneity concerns about the performanceownership relationship by using a simultaneous equations model. Their 2-SLS estimates show no statistical relationship between managerial ownership or top 5 shareholders ownership and performance. Rather, they find a significant negative influence of performance (Tobins Q or ROA) on managerial ownership or ownership of top 5 shareholders. That is, similar to Loderer and Martin (1997), management seems to hold fewer shares when a firm is doing well. Comparing the degree of endogeneity of management shareholdings and top 5 shareholders shareholdings, Demsetz and Villalongas (2001) model shows that Tobins Q has a stronger effect on managerial ownership than that of top 5 shareholders shareholdings.

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Finally, differences abound across these studies, in measurements and sample used, in estimating technique applied, in whether and how they account for the endogeneity of ownership structure, and in results obtained. We do not judge here which of these articles offers the most reliable guide. However these studies, viewed in totality, do not give strong evidence by which to reject the belief that firm performance and managerial equity ownership are unrelated.

3. Ownership Structure in Context of Bangladesh Textile Industry

Corporate governance system in Bangladesh, being a emerging economy, is less developed than that of developed nations such as US, UK, Germany or Japan. The institutional, regulatory and legal settings of developing countries differ significantly from industrial countries. The Mckinsey Emerging Market Investor Opinion Survey (2001) highlights that the emerging market corporate governance model is markedly different from that prevailing in the US, UK and other Englishspeaking countries in that the emerging market model is typically characterized by the control model of having concentrated ownership, insider boards, limited disclosure, inadequate minority shareholder protection, and a limited takeover market. In contrast, the typical features of the developed markets model include dispersed ownership, non-executive majority boards, high disclosure, shareholder equality, institutional investment, and an active takeover market. According to Mckinseys Survey Bangladesh easily falls into the first group. Given the above conditions, Bangladesh market comprises of mainly small and medium-sized firms with highly concentrated ownership. Ownership has become the predominant corporate governance mechanism, similar to the control model found in Germany and Japan. But, unlike the institutional majority owners of Japanese and German firms, concentrated individual or founder-family owners dominate private listed firms in Bangladesh. Table 1 presenting the ownership structure, considering both concentration and mix, of listed firms in the textile industry also supports the same. We can see that top five shareholders in these firms almost hold two third of the total shares thus indicating high concentration ratio. Moreover, sponsors hold around 50 percent while both institutional investors and public hold only around 25 percent of total share each. Table 1: Summary of ownership structure of firms in textile industry Percentage of top 5 Shareholder Sponsors Institutions Foreigner Public Government
*Values are in percentage

Mean 57.59 47.96 26.66 1.02 24.36 0.00

Median 55.91 50.00 27.53 0.00 25.19 0.00

Std. Dev 13.34 8.66 15.91 2.63 15.66 0.00

Minimum 35.71 27.47 0.00 0.00 0.00 0.00

Maximum 83.24 77.86 51.36 11.12 57.00 0.00

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Ownership Structure & Corporate Performance: An investigation on the Textile Sector of Bangladesh

Therefore, institutional activism occurs less in Bangladesh than in the JapaneseGerman systems. However, similar to the Japanese and German firms, most listed firms in Bangladesh rely heavily on either bank or public (i.e. government) funds and less on direct market sources for raising external finance. Nevertheless, Bangladesh firms emphasize shareholders interests, similar to Anglo-American firms. But, unlike the Anglo-American countries, the market for takeovers is weak and underdeveloped in Bangladesh. Therefore, the institutional setting for ownership structure in Bangladesh has unique features, an appreciation of which is important to understanding the governance mechanisms and processes that have evolved in Bangladesh.

4. Methodology and Data 4.1 Data

The data used in this study is derived from the listed firms of textile industry in DSE for the period of 2002 to 2006. The main performance data and other firm level data were manually collected from individual company annual reports for the respective years. The major items of interest are: balance sheets, income statements, ownership structure, and the percentage holdings of all direct shareholders. Price data and related ratios of firms not available in the annual reports were collected from the DSE website. Firms ceasing to trade during the period or having data missing for any variable used in the models were excluded from the study. All firms who survived the above screening for the whole study period were included in the analysis. Table 2: Descriptive statistics for the variables used in the model TOBINS Q ROA SIZE DEBT GROW C5 SPONSOR INSTIT PUBLIC FORG GOVT Mean 0.808 0.027 19.910 0.640 0.189 0.576 0.480 0.267 0.244 0.010 0.000 Median 0.799 0.017 20.037 0.597 0.015 0.560 0.500 0.275 0.252 0.000 0.000 Std. Dev 0.572 .030 1.286 0.413 1.120 0.133 0.087 0.159 0.157 0.026 0.000 Minimum -0.758 0.001 16..586 0.055 -0.890 0.357 0.275 0.000 0.000 0.000 0.000 Maximum 4.123 0.149 21.804 3.262 9.163 0.832 0.779 0.514 0.570 0.111 0.000

Table 2 reports descriptive statistics for the variables used in the model. The sample has a mean (median) Tobins Q of 0.808 (0.799), which is close to 1 indicating favorable average growth prospects for the sample firms. The mean (median) ROA is relatively low at 0.027 (0.017). The mean (median) capital structure is 0.64 (0.60) which suggest that the firms are more interested to use 6 of 14

Ownership Structure & Corporate Performance: An investigation on the Textile Sector of Bangladesh

debt than the equity. It also shows that the firms in the textile industry in Bangladesh are highly concentrated among few shareholders as the mean (median) cumulative shareholding of largest five shareholders is 0.576 (0.56). Among the different types of shareholders, sponsors has the highest percentage and foreigners has the lowest percentage of shareholding while it was found that the government do not hold any stake in these firms.

4.2 Variable Selection

In the model, to calculate firms performance two alternative methods were used namely Tobins Q and ROA (Return on Assets). Tobins Q is used as a forwardlooking market/hybrid measure of financial performance, whereas ROA is a backward-looking accounting measure of performance. ROA is the rate of return on capital employed both equity and debt capital and is measured by the ratio of net profit to book value of total assets employed. Tobins Q reflects firm performance as an indicator of the value of a firm as a going concern relative to the sum of the replacement costs of individual assets employed by the firm. Lindenberg and Ross (1981) discuss the theoretical Tobins Q. In this study, measurement problems did not allow the adoption of the theoretical Tobins Q. As an alternative, an approximate measure of Q similar to Chung and Pruitt (1994) is adopted for this study: Simple or Approximate Q = (MVE + DEBT) / BVTA Here, MVE is the market value of the firms equity, DEBT is the book value of the firms total debt and BVTA is the book value of total assets of the firm. This simple Q-value deviates from the theoretical Q in its use of the book value of total assets instead of their replacement cost and in the use of the book value of debt. Fernandez and Gomez (2002) indicate that the results of the empirical work are not likely to be sensitive to use of the Chung and Pruitts (1994) approximation. The measures of concentration are the cumulative percentage of shares held by the largest five shareholders (C5) and the ownership fraction (mix) is divided into the fraction owned by sponsors (SPONSORS), fraction owned by government (GOVT), the fraction owned by the foreigner (FORG), the fraction owned by companies (INSTIT), and the fraction owned by individuals (CITIZEN). By controlling for both ownership concentration and mix, we hope to be able to distinguish which factors are more significant in the firms performance. Factors other than ownership structure may also affect firms performance and health. To take them into account, we introduce a set of control variables such as firm size (SIZE), capital structure of the firms (DEBT), which is defined as total debt to total assets (TDTA), Growth opportunity of the firms (GROW) is defined as growth in sales. Table 1 of appendix 1 gives more details about the variable used and their definition and measures.

4.3 Model Specification

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Ownership Structure & Corporate Performance: An investigation on the Textile Sector of Bangladesh

To find out the relation between ownership structure and firms performance, ownership structure is broken down into two different variables i.e. ownership concentration (cumulative percentage of shareholdings by largest five shareholders) and ownership mix (fraction owned by sponsors, institutions, public, government and foreigners respectively). If ownership structure does not affect firms performance, it would be found that there is no correlation between firms performance and ownership concentration or ownership mix. Thus two hypotheses will be tested. These are:

H1: Ownership concentration does not affect firms performance. H2: Ownership mix does not affect firms performance.
Accordingly, the model has two equation with both having firms performance (Y) as dependent variable and in first one ownership concentration (C5) as independent variable whereas in the second one ownership mix (F) as independent variable. The equations are given below. Firm performance and ownership concentration equation:

Yi = 0 + 1SIZEi + 2DEBTi + 3GROWi + 4CRi + i

Firm performance and ownership mix equation:

(1)

Yi = 0 + 1SIZEi + 2DEBTi + 3GROWi + 4Fi + i

(2)

Here, Y is alternatively Tobins Q and ROA, CR is the concentration ratio which is the cumulative percentage of shareholding by largest five shareholders (C5) and F is the ownership fraction where it is alternatively SPONSOR, INSTIT, FORG, PUBLIC and GOVT. Other independent variables are described in detail in the table 1 in appendix 1 and is the error term. Equation (1) will be used to test the first hypothesis and equation (2) will be used to test the second hypothesis. Using these two equations and the collected data, regression analysis was run to find out whether there is any significant relation between ownership structure (considering both mix and concentration) and the firm performance among the listed firms in the Bangladesh textile industry. In the following section will discuss the result of the regression analysis and finding of the analysis.

5. Results
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Ownership Structure & Corporate Performance: An investigation on the Textile Sector of Bangladesh

The results of the regression analysis are presented here in separate subsections. At first it shows the analysis of the effect of ownership concentration on corporate performance measured by Tobins Q and ROA. Following that it moves to examining the effect of ownership mix on the firm performance measured by Tobins Q and ROA

5.1 Ownership Concentration Results

From Hypothesis 1, the variable (C5) representing ownership concentration is expected not to have any significant impact on corporate performance. However, from the regression results in table 3 the variable C5 was found to have a negative and significant impact on ROA at the 5% level of significance, while it has a positive and significant impact on Tobins Q at the same level of significance. However, the result for Tobins Q is more robust as proved by the Rsquare and the adjusted R-square. Moreover, the estimated coefficient of the C5 indicates that it has a greater impact on Tobins Q than that of ROA. Hypothesis 1 is thus rejected as C5 is significantly different from zero in regressions of ROA and Tobins Q. The significant impact of concentration ratios on Tobins Q supports the Shleifer and Vishny hypothesis (1986) that large shareholders may reduce the problem of small investors and, hence, increase the firms performance. The finding of a positive and significant relationship between ownership concentration and zzzzzzzz Table 3: Ownership concentration and firms performance Coefficient t statistics P value Coefficient t statistics P value Coefficient t statistics P value Coefficient t statistics P value Coefficient t statistics P value TOBINS Q -1.171 -1.156 0.252 0.041 0.857 0.395 0.908 7.168*** 0.000 0.017 0.375 0.709 0.962 2.404** 0.019 0.512 0.481 ROA -0.048 -0.699 0.487 0.005 1.597 0.115 0.019 2.204** 0.031 -0.001 -0.398 0.692 -0.072 -2.659** 0.010 0.182 0.128

Constant SIZE DEBT GROW C5 R2 Adjusted R2

***Significant at 1% level, **Significant at 5% level, *Significant at 10% level

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corporate performance is consistent with prior research based on advanced capital markets including Hill and Snell (1988, 1989), Kaplan and Minton (1994), and Morck, Nakamura and Shivdasani (2000), among others. However, this finding is inconsistent with the result of Wu and Cui (2002) that there is a positive relationship between ownership concentration and accounting profits (indicated by ROA), but consistent with the result of Leech and Leahy (1991) and Mudambi and Nicosia (1998).

5.2 Ownership Mix results

In this section, results of ownership mix are presented where Hypothesis 2 was tested. According to the hypothesis, if ownership mix is irrelevant to firm performance then the ownership fractions will be expected to be insignificant in equation 2. From the table 4 and table 5 we can see that SPONSOR, FORG and PUBLIC are significantly different from zero in regressions of ROA and Tobins Q. As a result Hypothesis 2 is also rejected as ownership fraction is found to have significant impact on the firm performance. Table 4: Ownership Mix and Firms Performance (ROA) Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics -0.039 -0.675 0.502 0.005 1.672* 0.100 0.016 1.908* 0.061 -0.001 -0.195 0.846 -0.075 -1.759* 0.084 -0.025 -0.996 0.323 0.034 1.395 10 of 14 ROA -0.044 -0.733 0.467 0.003 1.149 0.255 0.020 2.164** 0.035 -0.004 -0.119 0.906 -0.063 -1.135 0.261 0.004 1.270 0.209 0.020 2.219** 0.030 -0.003 -0.076 0.939 0.021 0.388 0.700 -0.001 -0.270 0.788 0.027 3.367*** 0.001 -0.001 0.400 0.691

Constant

SIZE

DEBT

GROW

SPONSOR

INSTIT

PUBLIC

Ownership Structure & Corporate Performance: An investigation on the Textile Sector of Bangladesh

FORG R2 Adjusted R2

P value Coefficien t t statistics P value 0.143 0.085 0.113 0.053

0.168 0.603 4.241*** 0.000 0.309 0.262

0.127 0.068

***Significant at 1% level, **Significant at 5% level, *Significant at 10% level

Table 5: Ownership Mix and Firms Performance (Tobins Q) Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value Coefficien t t statistics P value -0.185 -0.214 0.831 -0.013 -0.319 0.751 0.953 7.326*** 0.000 0.008 0.158 0.875 1.370 2.140** 0.037 0.061 0.159 0.874 -0.694 -1.901* 0.062 8.552 3.861*** 0.000 0.563 0.533 TOBINS Q 0.241 0.261 0.795 -0.002 -0.045 0.965 0.933 6.656*** 0.000 0.008 0.151 0.881 0.266 0.317 0.753 0.007 0.175 0.862 0.889 6.655*** 0.000 -0.013 -0.003 0.998 1.503 1.800* 0.077 -0.073 -1.713* 0.092 1.081 8.577*** 0.000 0.013 0.028 0.978

Constant

SIZE

DEBT

GROW

SPONSOR

INSTIT

PUBLIC

FORG R2 Adjusted R2

0.492 0.457

0.453 0.416

0.484 0.449

***Significant at 1% level, **Significant at 5% level, *Significant at 10% level

From the tables we can see that fractions of share owned by sponsors (SPONSOR) and foreigners (FORG) both have a significant impact on ROA at the 11 of 14

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10% and 1% level of significance respectably though sponsors have a negative relation and foreigners have a positive relation. On the other hand, fractions of share owned by sponsors (SPONSOR), foreigners (FORG) and public (PUBLIC) all have a significant impact of Tobins Q at the 5%, 1% and 10% level of significance respectably while both sponsors and foreigners have positive relation and public have a negative relation. However, institutional investors (INSTIT) do not seem to have any significant impact in both the cases. Among all, fraction of share owned by the foreigners have the highest correlation with the both the measures but the direction was positive with Tobins Q while it was negative with ROA. Results of the analysis of regression using Tobins Q is considered more robust again as suggested by the R-square and adjusted R-square. In all regressions, the controlling variable capital structure (DEBT) has a positive impact on the firms performance measures, Tobins Q and ROA, and they are significant at least at a 1% and 5% level in ROA and at 1% level in Tobins Q. The controlling variable firms size (Size) has negative and positive relation with Tobins Q and ROA respectively at 10% level of significance. However, control variable firms growth opportunity (GROW) is seems to have insignificant relation with both the performance measures. Finally, it can be said that the findings of a significant impact of ownership structure (mix) on corporate performance and value are consistent with prior research including Agrawal and Mandelker (1990), Xu and Wang (1997), Miguel and Pindado (2001), Lizal (2002), Abed Shahid (2003), Wei, Xie, and Zhang (2005), among others. Therefore, the results provide support for Shleifer and Vishny (1986) and for the agency theory (Jensen and Meckling, 1976).

6. Conclusions
In corporate governance, ownership structure is always considered as an important tool and thus its potential impact on the firms performance has been the matter of research for long. Although a number of researches have been carried out on the matter support for the nature of this relationship has been distinctively varied. While some theories and empirical investigations suggest that ownership structure affects firm performance, others suggest the irrelevance of the relationship between ownership structure and firm performance. Furthermore, most of the studies are conducted in developed countries and in some Asian countries where the characteristics of ownership structure are different from emerging economic countries. So, implications from the theory may not be applicable to other countries. This study provides evidence from the textile industry of Bangladesh, a emerging economic country, and expands the previous studies by investigating the effect of ownership in terms of concentration and fraction or mix.

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The empirical evidence in this paper shows that ownership structure and ownership concentration play an important role in the performance and value of the firms of textile industry listed in DSE. It shows Tobins Q and accounting profit such as ROA are different in their view while projecting firms performance as is evident from the different direction of their relations with the variables. The analysis has shown that ownership concentration has a positive relation with Tobins Q while a negative relation with ROA. Tobins Q have a positive association with all the shareholders i.e. sponsors, institutional investor and foreign investors except general public investors. On the other hand accounting profit showed a positive association with institutional, foreign and public investors. Research has also found out significant positive relation between sponsors shareholding with the firms performance measured in Tobins Q and significant negative relation between sponsors shareholding with accounting profit measures. Thus it can be said that sponsors are more concerned with the firms future benefits while public investors are concerned with the immediate profits. However, the result of this study are, to some extent, inconsistent with previous studies.

7. References
Zeitun, R. 2009, Ownership Structure, Corporate Performance and Failure: Evidence from panel data of emerging market: The case of Jordan, Journal of Corporate Ownership & Control 6, 96-114. Farooque, Omar Al, Zijl, Tony van, Dunstan, Keitha and Karim, AKM Waresul, 2007, Ownership Structure and Corporate Performance: Evidence from Bangladesh, Asia-Pacific Journal of Accounting & Economics 14, 127-150. H. Demsetz and B. Villalongar, 2001, Ownership structure and corporate performance, Journal of Corporate Finance 7,209233. Cho, M.-H., 1998, Ownership structure, investment, and the corporate value: an empirical analysis, Journal of Financial Economics 47, 103 121. Jeremy Grant and Thomas Kirchmaier, 2004, Corporate Ownership Structure and Performance in Europe, Center for economic performance (online) Abdel Shahid, S., 2003, Does Ownership Structure Affect Firm Value? Evidence from The Egyptian Stock Market, Working Paper, [online], Demsetz, H. and K. Lehn, 1985, The Structure of Corporate Ownership: Causes and Consequences, Journal of Political Economy 93, 11551177.

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Demsetz, H, 1983, The Structure of Ownership and the Theory of the Firm, Journal of Law and Economics 26, 375390. Fernandez, C. and S. Gomez, 2002, Does Ownership Structure Affect Firm Performance? Evidence from a Continental-type Governance System, working paper. Prowse, S., 1999, Corporate Governance in East Asia: A Framework for Analysis, Paper presented at high level Seminar on Managing Capital Flows, Bangkok, 15-16 June, 1998, Organized by ADB, IMF, WB and United Nations Economic and Social Commission for Asia and the Pacific. Shleifer, A. and R. W. Vishny, 1986, Large Shareholders and Corporate Control, Journal of Political Economy 94, 46 488. Shleifer, A. and R. W. Vishny, 1997, A survey of Corporate Governance, Journal of Finance LII, 737783.

Appendix 1
Table 1: Variables Definitions Variable label Variable Dependent variables TOBINS Q Proxy for tobins Q ROA Return on asset Variable definition (Market value of equity + book value of debt) book Value of total assets Net profit after tax book value of total assets Logarithm of total sales Total debt / Total Assets Growth in total sales Cumulative shareholding of largest five shareholders as a percentage of total outstanding shares Sponsors shareholding as a percentage of total outstanding shares Institutional shareholding as a percentage of total outstanding shares Public shareholding as a percentage of total outstanding shares Foreigners shareholding as a percentage of total outstanding shares

Independent variables SIZE Firms size DEBT Firms capital structure GROW Firms growth C5 Shares held by largest five shareholders SPONSOR INSTIT PUBLIC FORG Sponsors ownership Institutional ownership Public ownership Foreigners ownership

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GOVT

Governments ownership Governments shareholding as a percentage of total outstanding shares

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