ISSN: 2225-8329
Open access
This study examines the impact of ownership structure on firm performance for companies listed on the Amman Stock Exchange (ASE) in Jordan from 2015 to 2021. Specifically, it investigates the relationships between institutional, government, and foreign ownership, as well as ownership concentration, and their effects on firm performance measured by Return on Assets (ROA) and Tobin's Q. Using a sample of 158 firms and 1106 firm-year observations, the study employs a Generalized Method of Moments (GMM) estimator to address potential endogeneity issues. The results reveal that ownership structure significantly influences firm performance in the Jordanian context. Ownership concentration shows a strong positive relationship with both ROA and Tobin's Q, suggesting that concentrated ownership can lead to more effective monitoring and improved performance. Foreign ownership demonstrates positive effects on both performance measures, highlighting the benefits of international investment in enhancing both operational and market performance. Government ownership exhibits a positive association with ROA but not with Tobin's Q, indicating that state ownership may improve operational efficiency but not necessarily market perceptions. Institutional ownership shows mixed results, with a significant positive relationship with Tobin's Q but no significant impact on ROA. These findings have important implications for policymakers, investors, and corporate managers in Jordan and similar emerging markets. They suggest that policies to attract foreign investment and maintain some level of ownership concentration may be beneficial for firm performance. However, the mixed results for institutional and government ownership highlight the need for nuanced approaches to corporate governance that consider the varied impacts on different performance metrics. This study contributes to the literature by providing new empirical evidence on ownership-performance dynamics in an emerging market context and offers insights for improving corporate governance practices and policies in Jordan.
Al-Fayoumi, N., Abuzayed, B., & Alexander, D. (2010). Ownership structure and earnings management in emerging markets: The case of Jordan. International Research Journal of Finance and Economics, 38(1), 28-47.
Almazan, A., Hartzell, J. C., & Starks, L. T. (2005). Active institutional shareholders and costs of monitoring: Evidence from executive compensation. Financial Management, 34(4), 5-34.
Al-Najjar, B. (2015). Does ownership matter in publicly listed tourism firms? Evidence from Jordan. Tourism Management, 49, 87-96.
Al-Shattarat, W. K., Al-Shattarat, B. K., & Hamed, R. (2018). Do dividend announcements signal future earnings changes for Jordanian firms? Journal of Financial Reporting and Accounting, 16(3), 417-442.
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277-297.
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277-297.
ASE. (2022). Amman Stock Exchange Annual Report 2021. Retrieved from https://www.ase.com.jo/en/node/536
Banz, R. W. (1981). The relationship between return and market value of common stocks. Journal of Financial Economics, 9(1), 3-18.
Boone, A. L., Field, L. C., Karpoff, J. M., & Raheja, C. G. (2007). The determinants of corporate board size and composition: An empirical analysis. Journal of Financial Economics, 85(1), 66-101.
Boubakri, N., Cosset, J. C., & Saffar, W. (2008). Political connections of newly privatized firms. Journal of Corporate Finance, 14(5), 654-673.
Breusch, T. S., & Pagan, A. R. (1979). A simple test for heteroscedasticity and random coefficient variation. Econometrica: Journal of the Econometric Society, 1287-1294.
Bushee, B. J. (2001). Do institutional investors prefer near?term earnings over long?run value? Contemporary Accounting Research, 18(2), 207-246.
Chibber, P. K., & Majumdar, S. K. (1999). Foreign ownership and profitability: Property rights, control, and the performance of firms in Indian industry. The Journal of Law and Economics, 42(1), 209-238.
Claessens, S., Djankov, S., Fan, J. P., & Lang, L. H. (2002). Disentangling the incentive and entrenchment effects of large shareholdings. The Journal of Finance, 57(6), 2741-2771.
De Miguel, A., Pindado, J., & De La Torre, C. (2004). Ownership structure and firm value: New evidence from Spain. Strategic Management Journal, 25(12), 1199-1207.
Demsetz, H., & Lehn, K. (1985). The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93(6), 1155-1177.
Demsetz, H., & Villalonga, B. (2001). Ownership structure and corporate performance. Journal of Corporate Finance, 7(3), 209-233.
Dharwadkar, R., George, G., & Brandes, P. (2000). Privatization in emerging economies: An agency theory perspective. Academy of Management Review, 25(3), 650-669.
Djankov, S., & Hoekman, B. (2000). Foreign investment and productivity growth in Czech enterprises. The World Bank Economic Review, 14(1), 49-64.
Douma, S., George, R., & Kabir, R. (2006). Foreign and domestic ownership, business groups, and firm performance: Evidence from a large emerging market. Strategic Management Journal, 27(7), 637-657.
Drobetz, W., Schillhofer, A., & Zimmermann, H. (2004). Corporate governance and expected stock returns: Evidence from Germany. European Financial Management, 10(2), 267-293.
Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57-74.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The Journal of Law and Economics, 26(2), 301-325.
Grossman, S. J., & Hart, O. D. (1980). Takeover bids, the free-rider problem, and the theory of the corporation. The Bell Journal of Economics, 11(1), 42-64.
Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, 76(2), 323-329.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Kapopoulos, P., & Lazaretou, S. (2007). Corporate ownership structure and firm performance: evidence from Greek firms. Corporate Governance: An International Review, 15(2), 144-158.
Koh, P. S. (2007). Institutional investor type, earnings management, and benchmark beaters. Journal of Accounting and Public Policy, 26(3), 267-299.
McConnell, J. J., & Servaes, H. (1990). Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27(2), 595-612.
Mitton, T. (2006). Stock market liberalization and operating performance at the firm level. Journal of Financial Economics, 81(3), 625-647.
Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293-315.
Nguyen, T., Locke, S., & Reddy, K. (2015). Ownership concentration and corporate performance from a dynamic perspective: Does national governance quality matter? International Review of Financial Analysis, 41, 148-161.
Palepu, K. G., Healy, P. M., & Peek, E. (2013). Business analysis and valuation: IFRS edition. Cengage Learning.
Pesaran, M. H. (2004). General diagnostic tests for cross-section dependence in panels. University of Cambridge, Faculty of Economics, Cambridge Working Papers in Economics No. 0435.
Shleifer, A., & Vishny, R. W. (1986). Large shareholders and corporate control. Journal of Political Economy, 94(3, Part 1), 461-488.
Shleifer, A., & Vishny, R. W. (1994). Politicians and firms. The Quarterly Journal of Economics, 109(4), 995-1025.
Sun, Q., Tong, W. H., & Tong, J. (2002). How does government ownership affect firm performance? Evidence from China's privatization experience. Journal of Business Finance & Accounting, 29(1?2), 1-27.
Wei, Z., Xie, F., & Zhang, S. (2005). Ownership structure and firm value in China's privatized firms: 1991–2001. Journal of Financial and Quantitative Analysis, 40(1), 87-108.
Wintoki, M. B., Linck, J. S., & Netter, J. M. (2012). Endogeneity and the dynamics of internal corporate governance. Journal of Financial Economics, 105(3), 581-606.
Wooldridge, J. M. (2002). Econometric analysis of cross-section and panel data. MIT Press.
Xu, X., & Wang, Y. (1999). Ownership structure and corporate governance in Chinese stock companies. China Economic Review, 10(1), 75-98.
Young, M. N., Peng, M. W., Ahlstrom, D., Bruton, G. D., & Jiang, Y. (2008). Corporate governance in emerging economies: A review of the principal–principal perspective. Journal of Management Studies, 45(1), 196-220.
Zeitun, R. (2009). Ownership structure, corporate performance, and failure: Evidence from panel data of emerging market the case of Jordan. Corporate Ownership and Control, 6(4), 96-114.
Zeitun, R., & Tian, G. G. (2007). Does ownership affect a firm's performance and default risk in Jordan? Corporate Governance: The International Journal of Business in Society, 7(1), 66-82.
Alrwabdah, F., & Lok, C.-L. (2024). The Impact of Ownership Structure on Firm Performance in Jordan. International Journal of Academic Research in Accounting, Finance and Management Sciences, 14(3), 77–89.
Copyright: © 2024 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode