Abstract
This paper attempts to explore the effect of ownership
structure and excess control on firm performance in Pakistan.
The pragmatic examination is accomplished through
employing a data set comprising 289 non-financial firms
listed on KSE covering a period of 2004-2012. The results
indicate that both family owned and family controlled firms
show significantly lower financial performance than nonfamily owned and non-family controlled firms in Pakistan.
Further, family ownership tends to show a quadratic
relationship with firm performance. Family ownership is
negatively related whereas family ownership squared is
positively related to firm performance. The findings portray
that family ownership is negatively related at initial levels
and beyond a certain threshold level, it started to affect
positively the firm performance. Moreover, ownership
disparity (excess control) shows strongly negatively
relationship with family firms’ performance. These findings
clearly suggest that family firms suffer from agency conflicts
among controlling family shareholders and external
shareholders that seems the root cause of lower family firms’
performance in Pakistan. The ultimate controllers in family
firms use complex pyramidal ownership structures to achieve
an ultimate control over many firms simultaneously with
least capital invested. The findings are consistent with the
expropriation hypotheses proposed (La Porta, 2000). Most
importantly, the findings shed light on an important corporate
governance aspect of family ownership at higher levels
(family ownership squared) that it resolves agency conflict
between family shareholders-external shareholders and
affects positively the firm performance.
Waseemullah, Dr. Arsahd hasan. (2017) Family Ownership, Excess Control and Firm Performance: A Focus on the Family Firms in Pakistan , Paradigms , Vol 11, Issue 2 .
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