Ownership concentration, managerial ownership, and firm performance in Saudi listed firms

Helmi A. Boshnak ()
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Helmi A. Boshnak: King Abdulaziz University

International Journal of Disclosure and Governance, 2024, vol. 21, issue 3, No 8, 462-475

Abstract: Abstract This study aims to investigate the impact of ownership concentration and managerial ownership on firm performance in Saudi listed firms. The relationship between ownership concentration, managerial ownership, and firm performance is examined using a Fixed effects (FE) model and a Two-Stage least squares (2SLS) regression model for 70 Saudi listed firms over the period 2016–2021 to enable hypothesis testing, thereby addressing any autocorrelation, heteroscedasticity, and endogeneity issues. Ownership structure is captured in terms of ownership concentration and managerial ownership, and firm performance is gauged in terms of accounting-based performance (ROA and ROE) and market-based performance (TQ and MBR). The results show that the degree of both ownership concentration and managerial ownership positively affect firm performance, thus supporting agency theory and alignment effects arguments. Further, sales growth, audit firm size, and firm age positively affect firm performance while firm leverage, liquidity, and size have a negative effect. The findings have significant implications for Saudi regulators in their efforts to improve the efficiency of rapidly developing domestic capital markets, as well as to enhance investor protection and maintain economic confidence. The analysis may also contribute to the call for a corporate governance code to protect minority shareholders. The study has implications for investors, academics, and policymakers, as the findings indicate that ownership variables such as ownership concentration and managerial ownership have a key impact on firm operational and market performance. Investors may consider the findings to better understand the ownership-performance dynamic of Saudi listed firms when building their investment portfolios.

Keywords: Saudi Arabia; Ownership concentration; Managerial ownership; Performance; Agency theory (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41310-023-00209-0

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