Role of ownership in corporate governance and its impact on Firm performance: A case of companies listed in Pakistan Stock exchange.
Keywords:Corporate Governance, Ownership structure, financial performance, foreign ownership, director ownership, return on asset, return on equity, Tobin’s Q ratio
This research examines the firm’s performance cause by ownership structure. We decompose ownership into percentage of equity hold by foreigner and directors. This study identified three commonly used measures of financial performance of firm, namely, return on equity, return on asset, and Tobin’s Q ratio. The empirical finding showed that financial performance positively caused by ownership structure and more specifically foreign equity holder has significant improvement in terms of return on asset, return on equity and Tobin’s Q ratio. On the contrary, in case of the director ownership this study concludes a negative relationship with firm’s profitability and performance (measured through return on asset and return on equity). However, the negative relationship of director equity on Tobin’s Q was not statistically significant.