INST Institutional Ownership and Firm Value: A Study on the Bist Manufacturing Index
Articles
Mesut Doğan
Afyon Kocatepe University, Turkey
https://orcid.org/0000-0001-6879-1361
Published 2020-12-11
https://doi.org/10.15388/Ekon.2020.2.4
PDF
HTML

Keywords

institutional ownership
firm value
endogeneity

How to Cite

Doğan M. (2020) “INST Institutional Ownership and Firm Value: A Study on the Bist Manufacturing Index”, Ekonomika, 99(2), pp. 59-75. doi: 10.15388/Ekon.2020.2.4.

Abstract

The aim of this research is to test the relation between institutional ownership and firm value. To accomplish this aim, data from 104 firms listed in the BIST (i.e. Borsa Istanbul) industrial index between 2006 and 2018 have been used. Studies on the structure of ownership have problems with endogeneity. In order to avoid these problems, this study adopted Durbin-Wu-Hausman test with advanced econometric techniques, Ordinary Least Squares (i.e. OLS), and Two-Stage Least Squares (i.e. 2SLS). As a result of the simultaneous equation system improved in this study, a positive relation between institutional ownership as an endogenous variable, and firm value has been located. Besides, it has been found that institutional investors are more interested in the firms that have a higher market performance.

PDF
HTML

References

Agrawal, A. and Knoeber, C.R. 1996. Firm Performance and Mechanisms to Control Agency Problems Between Managers and Shareholders. Journal of Financial and Quantitative Analysis, 31(3), 377-397.
Al- Najjar D. 2015. The Effect of Institutional Ownership on Firm Performance: Evidence from Jordanian Listed Firms. International Journal of Economics and Finance, 7(12), 97-105.
Alfaraih, M., Alanezi, F. and Almujamed, H. 2012. The Influence of Institutional and Government Ownership on Firm Performance: Evidence from Kuwait. International Business Research, 5 (10), 192-200.
Alimehmeti, G. and Paletta, A. 2012. Ownership Concentration and Effects Over Firm Performance: Evidences From Italy. European Scientific Journal, 8(22), 39- 49.
Andersson, J., Jacob, N. and Salomonsson, D. 2004. The Link Between Ownership Structure and Firm Performance: Evidence From Sweden’s Listed Companies, https://gupea.ub.gu.se/bitstream/2077/2266/1/gbs_thesis_37.pdf, 02.03.2014.
Arouri, H., Hossain, M. and Muttakin, M.B. 2014. Effects of Board and Ownership Structure on Corporate Performance: Evidence from GCC Countries. Journal of Accounting in Emerging Economies, 4(1), 117- 130.
Arosa B., Iturralde T. and Maseda, A. 2010. Outsiders on The Board of Directors and Firm Performance: Evidence from Spanish Non-Listed Family Firms. Journal of Family Business Strategy, 1(4), 236–245.
Bathala, C.T., Moon, K.P and Rao, R.P. 1994. Managerial Ownership, Debt Policy and the Impact of Institutional Holdings: An Agency Perspective. Financial Management, 23(3), 38-50.
Beiner, S., Drobetz, W., Schmid, M.M. and Zimmermann, H. 2006. An Integrated Framework of Corporate Governance and Firm Valuation. European Financial Management, 12(2), 249- 283.
Ben Slama Zouari, S. and Boulila, T.N. 2014. Ownership Structure and Financial Performance in Islamicbanks: Does Bank Ownership Matter? International Journal of Islamic and Middle Eastern Finance and Management, 7(2), 146-160.
Bhattacharya, P. S. and Graham, M. A. 2009. On Institutional Ownership and Firm Performance: Adisaggregated View. Journal of Multinational Financial Management, 19(5), 370-394.
Blume, M.E. and Keim, D.B. 2012. Institutional Investors and Stock Market Liquidity: Trends and Relationships. https://www.researchgate.net/publication/256034545_Institutional_Investors_and_Stock_Market_Liquidity _Trends_and_Relationships, 15.06.2016.
Brickley, J.A., Lease, R.C. and Smith, C.W. 1998. Ownership Structure and Votingon Antitakeover Amendments. Journal of Financial Economics, 20(1), 267-291.
Chaganti, R. and Damanpour, F. 1991. Institutional Ownership, Capital Structure and Firm Performance. Strategic Management Journal, 12(7), 479-491.
Charfeddine, L. and Elmarzougui, A. 2010. Institutional Ownership and Firm Performance: Evidence from France. The IUP Journal of Behavioral Finance, 7, 35-46, https://www.researchgate.net/publication/228293240_Institutional_Ownership_and_Firm_Performance_Evi dence_from_France, 15.06.2016.
Cheung, Y.L., Connelly, J.T., Limpaphayom, P. and Zhou, L. 2007. Do Investors Really Value Corporate Governance? Evidence from the Hong Kong Market. Journal of International Financial Management and Accounting, 18(2), 86-122.
Cho, M.H. 1998. Ownership Structure, Investment and The Corporate Value: An Empirical Analysis. Journal of Financial Economics, 47(1), 103-121.
Choi, J.J., Park, S.W. and Yoo, S.S. 2007. The Value of Outside Directors: Evidence from Corporate Governance Reform in Korea. Journal of Financial and Quantitative Analysis, 42(4), 941- 962.
Clay, D.G. 2001. Institutional Ownership, CEO Incentives and Firm Value. Ph.D.Dissertation, University of Chicago.
Coffee, J.C.J. 1991. Liquidity Versus Control: The Institutional Investor as Corporate Monitor. Columbia Law Review, 9(1), 1277-1368.
Cong, R. 1999. How do I Test Endogeneity? How do I Perform a Durbin-Wu-Hausman Test?,http://www.stata.com/support/faqs/statistics/durbin-wu-hausman-test/, 15.06.2016.
Cook, R. 2013. The Relationship between Corporate Governance Practices and Firm Performance in the Junior Canadian Life Sciences Sector, Saint Mary’s University, Master of Business Administration, Halifax, Nova Scotia, Canada.
Craswell, A.T., Taylor, S.L. and Saywell, R.A. 1997. Ownership Structure and Corporate Performance: Australian Evidence. Pacific-Basin Finance Journal, 5(3), 301-323.
Demiralp, I.D., Mello, R., Schlingemann, F.P. and Subramaniam, V. 2011 . Are there Monitoring Benefits to Institutional Ownership? Evidence from Season Edequity Offerings. Journal of Corporate Finance, 17,1340-1359, http://www.tulane.edu/~vencat/instn.pdf, 15.06.2016.
Demsetz, H. 1983. The Structure of Ownership and the Theory of the Firm. Journal of Law and Economics, 26 (2), 375–390.
Demsetz, H. and Villalonga, B. 2001. Ownership Structure and Corporate Performance. Journal of Corporate Finance, 7(3), 209-233.
Duggal, R. and Millar, J.A. 1999. Institutional Ownership and Firm Performance: The case of Bidder Returns. Journal of Corporate Finance, 5 (2), 103-117.
Elyasiani, E. and Jia, J. 2010. Distribution of Institutional Ownership and Corporate Firm Performance. Journal of Banking and Finance, 34 (3), 606-620.
Faccio, M. and Lasfer, M.A. 2000. Do Occupational Pension Funds Monitor Companies in which they Hold Large Stakes?. Journal of Corporate Finance, 6(1),71-110.
Fauzi, F. and Locke, S. 2012. Board Structure, Ownership Structure and Firm Performance: A Study of New Zealand Listed-Firms. Asian Academy of Management Journal of Accounting and Finance, 8(2), 43– 67.
Fazlzadeh, A., Hendi, A. and Mahboubi, K. 2011. The Examination of the Effect of Ownership Structure on firm Performance in Listed Firms of Tehran Stock Exchange Based on the Type of the Industry. International Journal of Business and Management, 6(3), 249-266.
Ferreira, M. A. and Matos, P. 2008. The Colors Ofinvestors’ Money: The Role of Institutional Investorsaround the World. Journal of Financial Economics, 88(3), 499-533.
Gillan S. L. and Starks L.T. 2003. Corporate Governance, Corporate Ownership, and the Role of Institutional Investors: A Global Perspective. Journal of Applied Finance, 13(2), 4-22.
Guercio, D. And Hawkins, J. 1999. The Motivation and Impact of Pension Fundactivism. Journal of Financial Economics, 52(3), 293-340.
Guest, P.M. 2009. The Impact of Board Size on Firm Performance: Evidence From The UK. The European Journal of Finance, 15(4), 385-404.
Holderness, C.G., Kroszner, R.S. and Sheehan, D.P. 1999. Were the Good Old Daysthat Good? Evolution of Managerial Stock Ownership and Corporate Governance Since the Great Depression. Journal of Finance, 54(2), 435-469.
Hsu, M.F. and Wang, K. 2014. The Level and Stability of Institutional Ownership and Firm Performance: Evidence from Taiwan. Emerging Markets Finance and Trade, 50(2), 159-173.
IMF, 2005. Global Financial Stability Report: Market Developments and Issues. http://www.imf.org/external/pubs/ft/gfsr/2005/01/, 15.06.2016.
Kang, Y.S. and Kim, B.Y. 2012. Ownership Structure and Firm Performance: Evidence from the Chinese Corporate Reform. China Economic Review, 23(2), 471–481.
Kuznetsov, P. and Muravyev, A. 2001. Ownership Structure and Firm Performance in Russia: The Case of Blue Chips of the Stock Market, http://dev3.cepr.org/meets/wkcn/7/748/papers/kuznetsov-muravyev.pdf, 05.03.2014.
Lam, T.Y. and Lee, S.K. 2008. CEO Duality and Firm Performance: Evidence From Hong Kong. Corporate Governance, 8(3), 299-316.
Lee, S. 2009. Corporate Governance and Firm Performance. (Doctor of Philosophy). The University of Utah.
Loderer, C. and Martin, K. 1997. Executive Stock Ownership and Performance Tracking Faint Traces. Journal of Financial Economics, 45(2), 223-225.
Lowenstein, L. 1991. Why Managers Should (and Should Not) Have Respect for Their Shareholders. Journal of Corporation Law, 17, 1-27.
Masry M. 2016. The Impact of Institutional Ownership on the Performance of Companies Listed In the Egyptian Stock Market, IOSR Journal of Economics and Finance (IOSR-JEF) 7(1), 5-15.
Maug, E. 1998. Large Shareholders as Monitors: Is There a Trade-off between Liquidity and Control? Journal of Finance, 53, 65-98.
McConnell, J.J and Servaes, H. 1990. Additional Evidence on Equity Ownership and Corporate Value. Journal of Financial Economics, 27(2), 595-612.
Mokhtari, Z. and Makerani, K.F. 2013. Relationship of Institutional Ownership with Firm Value and Earnings Quality: Evidence from Tehran Stock Exchange. International Journal of Economy, Management and Social Sciences, 2(7), 495-502.
Mollah, S., Farooque, O.A. and Karim, W. 2012. Ownership Structure, Corporate Governance, and Firm Performance. Studies in Economics and Finance, 29, 301-319.
Nesbitt, S.L. 1994. Long-term Reward from Shareholder Activism: A study of the CalPERS Effect. Journal of Applied Corporate Finance, 6(4), 75-80.
Obradovich, J. D. and Gill, A. 2013. The Impact of Corporate Governance and Financial Leverage on the Value of American Firms. International Research Journal of Finance and Economics, 91, 1-13.
Oxelheim, L. and Randøy, T. 2003. The Impact of Foreign Board Membership on Firm Value. Journal of Banking and Finance, 27(12), 2369–2392.
Pound, J. 1988. Proxy Contests and the Efficiency of Shareholder Oversight. Journal of Financial Economics, 20(1- 2), 237-65.
Reyna, J.M.S.M. and Encalada, J.A.D. 2012. Ownership Structure, Firm Value and Investment Opportunities Set: Evidence from Mexican Firms. Journal of Entrepreneurship, Management and Innovation (JEMI), 8(3), 35-57.
Rose, C. 2007. Does Female Board Representation Influence Firm Performance? The Danish Evidence. Journal of Corporate Governance: An International Review, 15, 404-413.
Ruiz-Mallorquí, M.V. and Santana-Martín, D.J. 2011. Dominant Institutional Owners and Firm Value. Journal of Banking and Finance, 35(1), 118-129.
Saravanan, P. 2012. Corporate Governance and Company Performance- A Study With Reference to Manufacturing Firms in India. http://www.nfcgindia.org/pdf/cor_gover_manu_firms.pdf, 10.12.2013.
Smith, M.P. 1996. Shareholder Activism by Institutional Investors: Evidence from CalPERS. Journal of Finance, 51(1), 227-252.
Wang, Y. and Clift, B. 2009. Is There a “Business Case” for Board Diversity?. Pacific Accounting Review, 21(2), 88-103.
Vo, D. and Phan, T. 2013. Corporate Governance and Firm Performance: Empirical Evidence From Vietnam, http://www.murdoch.edu.au/School-of-Management-and-Governance/_document/Australian-Conferenceof- Economists/Corporate-governance-and-firm-performance.pdf, 03.12.2013.
Tahir, S.H., Saleem, M. and Arshad, H. 2015 Institutional Ownership And Corporate Value: Evidence From Karachi Stock Exchange (Kse) 30-Index Pakistan, Praktinimenadiment, 11(1), 41-49.
Thanatawee, Y. 2014. Institutional Ownership and Firm Value in Thailand, Asian Journal of Business and Accounting, 7(2), 1-22 .
Tsai, H. and Gu, Z. 2007. The Relationship Between Institutional Ownership and Casino Firm Performance. International Journal of Hospitality Management, 26 (3), 517-530.
Creative Commons License

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

Please read the Copyright Notice in Journal Policy