Concomitant of inside-shareholding, group affiliation and firm value: evidence from Pakistan


The present study inspects the comparative effects of inside shareholding on firm value for group-affiliated firms and non-group-affiliated firms in Pakistan. The research uses the excess-value as a performance measure by employing a chop-shop approach in treatment effects regression model (TERM). The results reveal that lower level and higher level inside shareholding negatively associated with firms’ value. However, it positively relates at a moderate level. Also, inside shareholding-value relationship differs significantly for group-affiliated firms and non-group-affiliated firms. Firms with inside shareholding at lower level appear to more visible in business groups, and these firms show adverse firms’ value consistent with divergence of interest effect. Nevertheless, inside ownership firms at a higher level, namely standalone firms, negatively affect firm value with entrenchment effect. The findings also confirm non-linearity in inside shareholding-firm value relationships.

Keyword : inside shareholding, firm value, excess value, business groups, incentives effect, entrenchment effect

How to Cite
Waseemullah, Tahir, S. H., Kaleem, M. S., Kanwal, T., & Quddoos, M. U. (2021). Concomitant of inside-shareholding, group affiliation and firm value: evidence from Pakistan. Business: Theory and Practice, 22(1), 133-145.
Published in Issue
Apr 22, 2021
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Abdullah, F., Shah, A., Gohar, R., & Iqbal, A. M. (2011). The effect of group and family ownership on firm performance: Empirical evidence from Pakistan. International Review of Business Research Papers, 7(4), 191−208.

Ali, W., Ansari, R. H., & Memon, M. A. B. (2020). Corporate governance and firm financial performance: a meta-analysis study. Journal of Accounting and Finance in Emerging Economies, 6(4), 917−940.

Ali, S. Z. A. S. S., & Saeed, M. M. (2011). Ownership structure and performance of firms: Empirical evidence from an emerging market. African Journal of Business Management, 5(2), 515−523.

Arshad, H., & Javid, A. Y. (2014). Does inside ownership matters in financial decisions and firm performance: Evidence from manufacturing sector of Pakistan. In PIDE-Working Papers 2014:107. Pakistan Institute of Development Economics.

Bae, S. C., Kwon, T. H., & Lee, J. W. (2011). Does corporate diversification by business groups create value? Evidence from Korean chaebols. Pacific-Basin Finance Journal, 19(5), 535–553.

Banchit, A., & Locke, S. M. (2011). Principal-principal cost: Is it a Big Problem in Asean 4 Markets? International Business Research Review Papers, 2(5), 1−15.

Bebchuk, L. A., & Weisbach, M. S. (2010). The state of corporate governance research. The Review of Financial Studies, 23(3), 939−961.

Belghitar, Y., Clark, E. & Kassimatis, K. (2011). Managerial ownership and firm performance: A re-examination using marginal conditional stochastic dominance. European Financial Management Association.

Benson, B. W., & Davidson, W. N. (2009). Re-examining the managerial ownership effect on firm value. Journal of Corporate Finance, 15(5), 573−586.

Berger, P. G., & Ofek, E. (1995). Diversification’s effect on firm value. Journal of Financial Economics, 37(1), 39−65.

Berke-Berga, A., I. Dovladbekova, & Abula, M. (2017). Managerial ownership and firm performance: Evidence of listed companies in the Baltics. Polish Journal of Management Studies, 15(2), 273−283.

Bertrand, M., Mehta, P., & Mullainathan, S. (2002). Ferreting out tunneling: An application to Indian business groups. Quarterly Journal of Economics, 117(1), 121–148.

Bozec, Y., & Laurin, C. (2008). Large shareholder entrenchment and performance: Empirical evidence from Canada. Journal of Business Finance & Accounting, 35(1−2), 25−49.

Chang, S. J. (2003). Ownership structure, expropriation, and performance of group-affiliated companies in Korea. Academy of Management Journal, 46(2), 238−253.

Choe, C., Dey, T., & Mishra, V. (2014). Corporate diversification, executive compensation and firm value: Evidence from Australia. Australian Journal of Management, 39, 395–414.

Claessens, S., Djankov, S., Fan, J. P., & Lang, L. H. (1999). Expropriation of minority shareholders: Evidence from East Asia. World Bank Washington, DC.

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.

Coles, J. L., Lemmon, M. L., & Meschke, F. (2012). Structural models and endogeneity in corporate finance: The link between managerial ownership and corporate performance. Journal of Financial Economics, 103(1), 149−168.

De Miguel, A., Pindado, J., & De La Torre, C. (2005). How dentrenchment and expropriation phenomena affect control mechanisms? Corporate Governance: An International Review, 13(4), 505−516.

Demsetz, H., & Lehn, K. (1985). The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93(6), 1155–1177.

Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008). The law and economics of self-dealing. Journal of Financial Economics, 88(3), 430–65.

Fahlenbrach, R., & Stulz, R. M. (2008). Managerial ownership dynamics and firm value. Journal of Financial Economics, 92(3), 342−361.

Filatotchev, I., Jackson, G., & Nakajima, C. (2013). Corporate governance and national institutions: A review and emerging research agenda. Asia Pacific Journal of Management, 30(4),965−986.

Gohar, R., & Karacaer, S. (2009). Pakistani business groups: A comparison of group affiliated and unaffiliated firm performance. NUST Journal of Business and Economics, 2(2), 41−53.

Gordon, G., & Nicholson, N. (2010). Family wars: Stories and insights from famous family business feuds. Kogan Page.

Hamza, S. M., & Suman, S. S. (2018). The impact of ownership structure and firm performance: A study on Bombay Stock Exchange in India. International Journal of Accounting & Business Management, 6(1), 21−38.

He, J., Mao, X., Rui, O. M., & Zha, X. (2013). Business groups in China. Journal of Corporate Finance, 22, 166–192.

Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–61.

Heugens, P. P., & Lander, M. W. (2009). Structure! Agency! (and other quarrels): A meta-analysis of institutional theories of organisation. Academy of Management Journal, 52(1), 61−85.

Hoang, L. T., Nguyen, C. C., & Hu, B. (2017). Ownership structure and firm performance improvement: Does it matter in the Vietnamese Stock Market? Economic Papers, 36(4), 416−428.

Hu, Y., & Zhou, X. (2008). The performance effect of managerial ownership: Evidence from China. Journal of Banking & Finance, 32(10), 2099−2110.

Itturalde, D. T., Maseda, D. A., & Arosa, D. B. (2011). Insiders ownership and firm performance. Empirical evidence. International Research Journal of Finance and Economics, 67, 118−129.

Javid, A. Y., & Iqbal, R. (2008). Ownership concentration, corporate governance and firm performance: Evidence from Pakistan. The Pakistan Development Review, 47(4), 643−659.

Jensen, M. C. (1986). Agency costs of free cash ow, corporate finance, and takeovers. The American Economic Review, 76(2), 323−329.

Kamardin, H. (2014). Managerial ownership and firm performance: The influence of family directors and non-family directors. In Ethics, governance and corporate crime: challenges and consequences, Vol. 6 (pp. 47−83).

Kaserer, C., & Moldenhauer, B. (2008). Insider ownership and corporate performance: evidence from Germany. Review of Managerial Science, 2(1), 1−35.

Katper, N., Shaikh, S. S., Anand, V., & Imtiaz, N. (2018). Analysing the impact of managerial ownership on the performance of shariah-compliant firms in Pakistan. International Business Research, 11(11), 55−66.

Khan, A., Mather, P. R., & Balachandran, B. (2014). Managerial share ownership and operating performance: Do independent and executive directors have different incentives. Australian Journal of Management, 39(1), 47−71.

Khan, F. U., & Nouman, M. (2017). Does ownership structure affect firm’s performance? Empirical evidence from Pakistan. Pakistan Business Review, 19(1), 228−250.

Kidwell, R. (2008). Adelphia communications: The public company that became a private piggy bank, a case of fraud in the Rigas family firm. In S. Matulich & D. M. Currie (Eds.), Handbook of frauds, scams and swindles: Failures of ethics in leadership (pp. 191–206). Taylor and Francis Group.

King, M. R., & Santor, E. (2008). Family values: Ownership structure, performance and capital structure of Canadian firms. Journal of Banking & Finance, 32(11), 2423−2432.

Laeven, L., & Levine, R. (2007). Complex ownership structures and corporate valuations. The Review of Financial Studies, 21(2), 579−604.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58(1), 3–27.

Lee, K., Peng, M. W., & Lee, K. (2008). From diversification premium to diversification discount during institutional transitions. Journal of World Business, 43(1), 47−65.

Li, D., Moshirian, F., Nguyen, P., & Tan, L. W. (2007). Managerial ownership and firm performance: Evidence from China’s privatisations. Research in International Business and Finance, 21(3), 396−413.

Lins, K. V. (2003). Equity ownership and firm value in emerging markets. Journal of Financial and Quantitative Analysis, 38(1), 159−184.

Martin, G., Gomez-Mejia, L. R, Berrone, P., & Makri, M. (2017). Conflict between controlling family owners and minority shareholders: Much ado about nothing? Entrepreneurship Theory and Practice, 41(6), 999−1027.

McKee, D., Madden, T. M., Kellermanns, F. W., & Eddleston, K. A. (2014). Conflicts in family firms: The good and the bad. Sage handbook of family business. Sage.

Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293−315.

Mueller, E., & Spitz, A. (2001). Managerial ownership and firm performance in German small and medium-sized enterprises. Corporate Finance, Capital Structure & Payout Policies.

Nguyen, T., Locke, S., & Reddy, K. (2015). Does boardroom gender diversity matter? Evidence from a transitional economy. International Review of Economics & Finance, 37, 184−202.

Pant, M., & Pattanayak, M. (2007). Insider ownership and firm value: Evidence from Indian corporate sector. Economic and Political Weekly, 42(16), 1459−1467.

Ruan, W., Tian, G., & Ma, S. (2011). Managerial ownership, capital structure and firm value: Evidence from China’s civilian-run firms. Australasian Accounting, Business and Finance Journal, 5(3), 73−92. iss3/6

Shahab-u-Din, & Javid, A. Y. (2011). Impact of managerial ownership on financial policies and the firm’s performance: evidence Pakistani manufacturing firms. International Research Journal of Finance and Economics, 81(1), 13−29.

Villalonga, B., & Amit, R. (2006). How do family ownership, control and management affect firm value? Journal of Financial Economics, 80(2), 385−417.

Vintilă, G., & Gherghina, Ş. C. (2015). Does ownership structure influence firm value? An empirical research towards the Bucharest Stock Exchange-listed companies. International Journal of Economics and Financial Issues, 5(2), 501−514.

Waseemullah, Ali, S., & Mehmood, S. (2017). Impact of excess control, ownership structure and corporate governance on firm performance of diversified group firms in Pakistan. Business & Economic Review, 9(2), 49−72.

Waseemullah, & Hasan, A. (2018). Business group affiliation and firm performance − Evidence from Pakistani listed firms. The Pakistan Development Review, 57(3), 351−371.

Wellalage, N. H., & Locke, S. M. (2014). Ownership structure and firm financial performance: Evidence from panel data in Sri Lanka. Journal of Business Systems Governance & Ethics, 7(1).

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.

Zondi, S., & Sibanda, M. (2015). Managerial ownership and firm performance on selected JSE listed firms. Corporate Ownership & Control, 12(3−2), 233−241.