Does ownership structure influence firm performance? Empirical insights from an emerging market

Abstract

This paper examines empirically the question of whether ownership structure leads to improvements in firm performance in an emerging market like Nigeria. The institutional climate in Nigeria differs from that of many industrialized economies in several ways, including a weak corporate control market, a strong concentrated ownership and weak investor protection. We utilize data on 73 firms, allowing us to discriminate between alternative hypotheses and to answer causal research questions on the relationship between ownership structure and firm performance. The results for concentrated ownership structure suggest that concentrated ownership has negative and insignificant impact on firm performance, which lend some credence to the entrenchment effects. Overall, the evidence supports the view that foreign ownership can be an effective mechanism to impact and thus ameliorate performance and, moreover, highlights the importance of assessing firm performance across alternative governance structures.