AN EMPIRICAL ANALYSIS OF FIRMS' OWNERSHIP STRUCTURE AND GROWTH: EVIDENCE FROM PAKISTAN STOCK EXCHANGE
DOI:
https://doi.org/10.37435/nbr.v7i2.131Keywords:
: Ownership structure, Firm growth, GMM approach, PSX, Panel dataAbstract
Purpose: This study aims to investigate the impact of firms’ ownership structure on growth. Particularly it examines the effect of institutional, managerial and foreign ownership on growth of listed firms in an emerging country.
Design/Methodology: Generalized Method of Moments (GMM) approach was employed to conduct regression analysis. A 10 years’ sample of 100 non-financial companies listed on PSX was taken for the period 2011-2020
Findings: The results indicate that institutional ownership is positively associated with both the proxies of firm growth in Pakistan. Contrary to the initial prediction, managerial ownership also positively influences firm growth. This is due to the fact that in Pakistan, most of the managers are family members or owners which may work towards enhancing firm value. Furthermore, a positive relationship was observed between foreign ownership and firm growth, indicating that foreign investors enhance firm growth.
Implications: The findings of this study will be useful for policy makers, managers and practitioners in determining the role of various categories of equity ownership on firm growth and help firms in developing relevant policies to enhance growth within corporate sector.
Originality: Despite a number of studies examining the relationship between ownership structure and firm performance, research specifically focused on firm growth in context of Pakistan remains limited. This lack of evidence is further addressed in the present study through use of system’s GMM technique with both asset growth and sales growth as proxies to offer more comprehensive results regarding the influence of ownership structure on firm growth in a recent time frame.
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