OWNERSHIP CONCENTRATION AND FIRM PERFORMANCE: EVIDENCE FROM THE BANKING SECTOR OF PAKISTAN (original) (raw)

2018, International Journal of Management, IT and Engineering (IJMIE) ISSN: 2249-0558 Volume 8, Issue 9

In this research the researcher investigatedrelationship between ownership concentration and performance, of the banking sector in Pakistan. This study analyzed 19 commercial banks listed in the Pakistan stock exchange (PSX), for a time period of 10 years (2006-2015). The selection of 19 listed commercial banks was of the reason mainly due to fill the financial literature gap of the Pakistani banking sector regarding ownership concentration. Since not enough previous research has been done on the ownership concentration with respect to the Pakistan's banking sector. Furthermore, out of the total 21 listed banks, only 19 were selected due to the availability of data. The study used secondary data on the bank ownership and financial performance. These secondary data was obtained mainly from limited commercial banks financial statements.The ownership concentration was measured with three indicators, percentage of largest shareholder (LSH), percentage of five largest shareholders (FIVELSH) and percentage of ten largest shareholders (TENLSH). The shareholder (LSH), which is measured by the percentage of largest single shareholder of a company, is the narrowest. Firms performance was measured by market based measure Tobin's Q (TQ), and accounting based measures Return on equity (ROE) and Return on assets (ROA). Analysis was done by multiple regression models. The findings were that largest shareholder (LSH) had a statistically significant positive relationship with accounting based performance measure, Return on assets (ROA), whereas the rest of the ownership indicators were insignificant. Furthermore, all the ownership concentration indicators also were in insignificant relationship with the performance measures, Return on equity (ROE) and Tobin's Q (TQ). With understanding the relationship of the ownership concentration with the performance of the commercial banks in Pakistan, the policy makers, management and investors helps them to increase the firm value.