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The effect of ownership structure on firm performance: Additional evidence

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  • Ki C. Han
  • David Y. Suk

Abstract

This article examines the effect of ownership structure on corporate performance, using stock returns as a measure of performance. Based on the 1988–1992 sample period, we find that the level of insider ownership is positively related to stock returns. This result suggests that as managers' equity ownership increases, their interests coincide more with those of outside shareholders. But we also find that the square of the level of insider ownership is inversely related to stock returns, indicating that excessive insider ownership rather hurts corporate performance probably due to the problem associated with managers' entrenchment. Finally, we find that stock returns are positively related to institutional ownership, indicating that institutional owners are active in monitoring management.

Suggested Citation

  • Ki C. Han & David Y. Suk, 1998. "The effect of ownership structure on firm performance: Additional evidence," Review of Financial Economics, John Wiley & Sons, vol. 7(2), pages 143-155.
    • Handle: RePEc:wly:revfec:v:7:y:1998:i:2:p:143-155
    DOI: 10.1016/S1058-3300(99)80150-5
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    5. Yufei Cao & Abdulmajeed Mawhan H. Alfadhli & Mohammad Jaradat & Ramona Lile & Mihaela Gadoiu & Mariana Banuta & Daniela Mihai & Malik Shahzad Shabbir, 2024. "The impact of accounting practices on financial sustainability: A study of external block-holders and institutional ownership," Review of Managerial Science, Springer, vol. 18(7), pages 1945-1961, July.

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