IDEAS home Printed from https://ideas.repec.org/a/pid/journl/v51y2012i4p161-183.html
   My bibliography  Save this article

Firm Performance and the Nature of Agency Problems in Insiders-controlled Firms: Evidence from Pakistan

Author

Listed:
  • Fahad Abdullah

    (Institute of Management Sciences, Peshawar)

  • Attaullah Shah

    (Institute of Management Sciences, Peshawar)

  • Safi Ullah Khan

    (Kohat University of Sciences and Technology, Kohat)

Abstract

This paper studies the impact of corporate ownership structure on firm performance. This paper tests whether policy intervention with respect to blockholding and higher managerial ownership is required in Pakistan. We hypothesise that market places expropriation premium on stocks of such firms where large insiders are present. In addition to poor market performance, such firms are expected to show poor accounting performance due to various forms of expropriations. These hypotheses are tested on a sample of 183 firms listed at the Karachi Stock Exchange over the period 2003-2008 with the help of OLS and 2SLS regressions while controlling for other explanatory variables that have been identified in the literature. The results indicate that both the market- and accounting-based measures of performance are negatively related to the ownership percentage of incumbent managers. Among the control variables, Tobin’s Q increases with growth opportunities and tangibility of assets, whereas it decreases with firm size, market risk, firm-specific risk, and ownership percentage of institutional shareholders.

Suggested Citation

  • Fahad Abdullah & Attaullah Shah & Safi Ullah Khan, 2012. "Firm Performance and the Nature of Agency Problems in Insiders-controlled Firms: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 161-183.
    • Handle: RePEc:pid:journl:v:51:y:2012:i:4:p:161-183
    as

    Download full text from publisher

    File URL: http://www.pide.org.pk/pdf/PDR/2012/Volume4/161-183.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Waseem Ullah & Shahid Ali & Sajid Mehmood, 2017. "Impact of Excess Control, Ownership Structure and Corporate Governance on Firm Performance of Diversified Group Firms in Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(2), pages 49-72, June.
    2. Ali Metwalli & Jim P. DeMello, 2021. "Mergers and Acquisitions in the Indian Sub-Continent: 2010-2019," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 26(2), pages 33-55, July-Dec.
    3. Shah, Mohay Ud Din & Shah, Attaullah & Khan, Safi Ullah, 2017. "Herding behavior in the Pakistan stock exchange: Some new insights," Research in International Business and Finance, Elsevier, vol. 42(C), pages 865-873.
    4. Yushi Jiang & Muhammad Shujaat Mubarik & Syed Imran Zaman & Syed Hasnain Alam & Muhammad Arif, 2024. "Corporate governance, cash holding, and firm performance in an emerging market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2787-2803, July.
    5. Khan, Naimat U. & Shah Jehan, Qurat Ul Ain & Shah, Attaullah, 2017. "Impact of taxation on dividend policy: Evidence from Pakistan," Research in International Business and Finance, Elsevier, vol. 42(C), pages 365-375.
    6. Kamran & Attaullah Shah, 2014. "The Impact of Corporate Governance and Ownership Structure on Earnings Management Practices: Evidence from Listed Companies in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(2), pages 27-70, July-Dec.
    7. Sharif Ullah Jan & Hashim Khan, 2018. "Return Volatility and Macroeconomic Factors: A Comparison of US and Pakistani Firms," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 10(2), pages 1-28, June.
    8. Zubaida Batool & Attiya Yasmin Javid, 2014. "Dividend Policy and Role of Corporate Governance in Manufacturing Sector of Pakistan," PIDE-Working Papers 2014:109, Pakistan Institute of Development Economics.
    9. Sattar Khan & Yasir Kamal & Shahid Hussain & Muhammad Abbas, 2022. "Corporate governance looking back to look forward in Pakistan: a review, synthesis and future research agenda," Future Business Journal, Springer, vol. 8(1), pages 1-32, December.
    10. Khan, Safi Ullah, 2022. "Financing constraints and firm-level responses to the COVID-19 pandemic: International evidence," Research in International Business and Finance, Elsevier, vol. 59(C).
    11. Imad Rahim & Attaullah Shah, 2019. "Corporate Financing and Firm Efficiency: A Data Envelopment Analysis Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 58(1), pages 1-25.
    12. Safi Ullah Khan, 2022. "How funding matters: Reinitiating of New Product Development and the moderating effect of extramural R&D," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 18(4), pages 185-219.
    13. Attaullah Shah & Jasir Ilyas, 2014. "Is Negative Profitability-Leverage Relation the only Support for the Pecking Order Theory in Case of Pakistani Firms?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 53(1), pages 33-55.

    More about this item

    Keywords

    Ownership Structure; Firm Performance; Large Insiders; Tobin’s Q; Pakistan;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pid:journl:v:51:y:2012:i:4:p:161-183. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Khurram Iqbal (email available below). General contact details of provider: https://edirc.repec.org/data/pideipk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.