Ownership Concentration and its impact on Firm Performance

Abstract

The study shows the effect of ownership concentration on the firm’s performance –profitability, growth in assets and growth in sales.This thesis studies the influence of ownership concentration on the performance of business or firm. This topic has been a commonly discussed issue among scholars. The results of thesis show that the firm which is closely held by owner managers performs well as compare to the business controlled by hired managers. Owner managers tries to maximize the value of business, make suitable decisions with the intentions of long term benefits. Closely held governance is an effective tool to remove the agency issues. It ensures that all activities are properly managed and decisions are effectively made by managers to enhance the performance of the firm. It also reduces the conflict between the principal and agent as it aligns the interests of principal and agents. In this study firm performance is defined as the profitability, growth, risk and value of the firm. In Pakistan and in other developing countries, almost half of the businesses are closely held by owners so determining the influence of concentrated ownership on the performance of the business is a vital contribution for the betterment of corporate sector.This research has been conducted in business sector of Bahawalpur and its nearbyareas. The financial data of 20 different businesses has been taken for the analysis. The data has been used to analyze the firm’s performance. Performance has been measured in three aspects: a) Profitability b) Growth in Assets c) Growth in sales. Their results have been analyzed to find the effect of ownership concentration on firm performance.