The Impact of Ownership Structure on Firm Performance: Evidence from Saudi Arabia

Abstract

This research examines the possible impacts of different types of ownership structures (ownership concentration, family, institutional, managerial and foreign ownership) on firm performance in Saudi Arabia. The research uses ordinary least squares (OLS) regressions to test the research hypotheses, concentrating on a five-year (2014 to 2018) panel dataset of 112 non-financial firms. The research uses two financial tools to measure firm performance: return on assets (ROA) and share market return (MR). The research evaluates the relationship between firm performance and ownership structure using three control variables: financial leverage, firm age and firm size. Ownership concentration is found to have a positive, statistically significant effect on firm performance, family ownership is found to have a negative, statistically significant effect, managerial ownership is found to have a positive, statistically significant effect on firm performance. Foreign shareholders and institutional ownership are both found to have negative, statistically insignificant effects on firm performance. This research contributes to the debate surrounding the agency problem and the separation of control between shareholders and managers in emerging markets.