Ownership structure’s effect on financial performance: An empirical analysis of Jordanian listed firms

Abstract

This study aims to examine the impact of the ownership structure on firm performance in the Jordan. This study employed the multiple-regression model and fixed regression effect to analyse the data. The sample included all Jordanian first market firms listed on the Amman Stock Exchange (ASE) from 2012 to 2018. The paper’s findings reveal a positive and significant relationship between institutional ownership and both accounting measure Return on Assets (ROA) and market measure Tobin’s Q (TQ). Other ownership structure types, such as concentration of ownership, also affect ROA and TQ. While managerial ownership shows a negative relationship with ROA, but there is no association with TQ. This study has broad and comprehensive practical implications that are good for policymakers. On the one hand, it adds to the debate on agency theory from the ownership structure and firm’s performance relationship. On the other hand, it helps the Jordanian Government formulate policies and regulations to strengthen corporate governance (CG), which increases the interests of all stakeholders in the Jordanian market.

Keywords:

• Ownership Structure
• Financial performance
• Emerging Markets
• Return on Assets
• Tobin’s Q

PUBLIC INTEREST STATEMENT

Financial performance has been the central topic of various scholars, academics, and policymakers for a long time. According to agency theory perspective , ownership structure is one of the most poweful tools that influance firms’ performance. Ownership structure has been investigated in both developed and developing countries as a factor that affects both on stakeholders’ benefits and firms’ success. Based on the Jordanian market, the purpose of the current study was to determine the effect of ownership structure on financial performance using accounting and market indicators. The findings imply that ownership structure can enhance the level of financial performance. Furthermore, the existance of various groups of ownership help to increase the investors’ satisfaction, and assist shareholders to predict the firms’ performance to select the optimal investment opportunities.

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Amneh Alkurdi

Amneh Alkurdi is an assistant professor at the Accounting Department, Faculty of Administrative and Financial Sciences, the Aqaba University of Technology, Jordan. Her research interests consist of corporate governance, ownership structure, taxation, Auditing and Financial Accounting.

Amneh hamad is a lecture at the Accounting Department, school of business, the University of Jordan, her work focuses on financial accounting, governmental accounting and corporate accounting.

Hussam Althonybat is an assistant professor at the business administration department, Faculty of Administrative and Financial Sciences, the Aqaba University of Technology, Jordan. His research interests focuses on strategic management, decision-making and firm’s ethics.

Mahmoud Elmarzouky is a Lecturer in Accounting and Finance at The University of Westminster, United Kingdom. His research interests consist of Auditing, Reporting Quality, Taxation, Content analysis, Narrative Disclosure, Corporate Narrative Reporting, Risk disclosure, Financial reporting standards, Islamic finance and corporate governance.