The effects of ownership concentration and controlling shareholders on firm performance the evidence from Malaysia

This thesis examines the effect of ownership concentration and controlling shareholder on firm performance with evidence from listed-Malaysian firms. Five research question are investigated: (1) What is the relationship between ownership concentration and firm performance; (2) What is the relationship between controlling shareholders and firm
performance; (3) What is the relationship between board size and firm performance; (4)
What is the relationship between firm size and firm performance; and (5) What is the
relationship between debt-to-equity ratio and firm performance. Two measurement of firm performance are used: Return on Assets (ROA) and Tobin’s Q (TQ). In the theory review, corporate governance theory and principal-agent theory are introduces as theoretical foundation. Corporate governance theory discusses the principal-agent problem and model of corporation (stockholder and shareholder model). Ownership structure is believed to affect firm performance, thus different arguments related to the effect of ownership concentration and owner characteristics on firm performance are reviewed. In regards to the methodology, five testable hypotheses are generated for empirical analyses using panel data on 150 firms over five years from 2008 to 2012. Simple statistics analysis and regression analysis are combined: simple statistics analysis used descriptive statistics and correlation analysis to analyze firm’s characteristics; regression analysis applies OLS regression to test the effect of ownership concentration and controlling shareholder on firm performance. Finally, the research question are answered: ownership concentration has positive effect, while controlling shareholders has negative effects on firm performance. It is found that ownership has a positive effect on ROA and TQ, but the results are insignificant; thus the results concluded that ownership concentration has not effect on firm performance. The effect of controlling shareholder on firm performance exhibit a negative results. Thus, the results concluded that the positive and negative effect of controlling shareholders on firm performance depends upon the size and characteristics of the large shareholders.