Ownership concentration and corporate performance from a dynamic perspective: Does national governance quality matter? |
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| Institution: | 1. Department of Finance, Waikato Management School, The University of Waikato, Gate 1 Knighton Road, Private Bag 3105, Hamilton 3240, New Zealand;2. Faculty of Economics and Business Administration, Dalat University, No 01 Phu-Dong-Thien-Vuong Street, Dalat, Lamdong, Vietnam;1. Institute of Environmental Engineering and Management, National Taipei University of Technology, No.1, Sec. 3, Zhongxiao E. Rd, Taipei 106, Taiwan, ROC;2. Centre for Technology in Water and Wastewater, School of Civil and Environmental Engineering, University of Technology, Broadway, Sydney, NSW 2007, Australia;3. Department of Water Resources and Environmental Engineering, TamKang University, 151 Yingzhuan Road, Tamsui District, New Taipei City 25137, Taiwan, ROC;1. Division of Finance, College of Management, Yuan Ze University, Taiwan;2. Department of Finance and Economics, College of Business Management and Accounting, Universiti Tenaga Nasional, Malaysia;3. Department of Accounting, College of Business Management and Accounting, Universiti Tenaga Nasional, Malaysia;4. Department and Graduate Institute of Finance, Feng Chia University, Taiwan;1. INALDE Business School, Universidad de la Sabana, Autopista Norte Km. 7, Chía, Colombia;2. IESA Business School, Ave IESA, San Bernardino, Caracas, Venezuela;3. Paseka School of Business, Minnesota State University Moorhead, 1104 Seventh Ave South, Moorhead, MN, USA;4. Escuela de Administración Universidad Pedagógica y Tecnológica de Colombia (UPTC) Tunja, Colombia;5. Universidad de los Andes, Bogotá, Colombia |
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| Abstract: | In this paper, the relationship between ownership concentration and financial performance of companies in Singapore and Vietnam is investigated in a dynamic framework. By focusing on two different types of national governance systems (well-developed vs. under-developed), we observe how the relationship is moderated by the national governance quality. We find that the performance effect of concentrated ownership persists in these markets even after the dynamic nature of the ownership concentration–performance relationship is taken into consideration. Our finding supports the prediction of agency theory about the efficient monitoring effect of large shareholders in markets with highly concentrated ownership. In addition, we find that national governance quality does matter when explaining the ownership concentration–performance relationship. The positive effect of concentrated ownership on performance of firms operating in the under-developed national governance system (Vietnam) tends to be stronger than that in the well-established system (Singapore). This finding is consistent with the argument that ownership concentration is an efficient corporate governance mechanism which can substitute for weak national governance quality. Econometrically, our findings still hold even after controlling for dynamic endogeneity, simultaneity, and unobserved time-invariant heterogeneity, inherent in the corporate governance–performance relationship. |
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