We really appreciate the valuable time, guidance and advice she has given us in completing this research project. In this study, our main objective is to determine the relationship between ownership structure and firm performance in Malaysia. Not only that, we enlarge our study to focus more on the relationship between managerial ownership structure and firm performance and also the relationship between non-managerial ownership structure and firm performance in Malaysia.
In other words, we wanted to examine the result on whether or not a different ownership structure will affect firm performance. The objective of this research is to determine the relationship between ownership structure and performance of firms in Malaysia in the trade and service sectors. 70 companies in the trade and service sectors were selected and carefully analyzed to determine the relationship between ownership structure and company performance by conducting a series of tests in Eviews.
RESEARCH OVERVIEW
- Introduction
- Research Background
- Performance of trading and services sector in Malaysia
- Managerial ownership
- Non-Managerial ownership
- Agency Problem
- Problem Statement
- Research Objective
- General Objective
- Specific Objective
- Research Question
- Hypothesis of the study
- Managerial ownership structure affects the firm performance in trading and services sector in Malaysia
- Non-managerial ownership structure affects the firm performance in trading and services sectors in Malaysia
- Significance of the Study
- Chapter Layout
- Conclusion
This research was an attempt to determine the relationship between the ownership structure of fixed income companies listed on Bursa Malaysia in the trading and service sector and company performance. However, the relationship between ownership structure and company performance remains a long-standing topic in the corporate world. From the journals that have been reviewed, most of the researchers have discussed the relationship between corporate ownership structure and corporate performance in China, Italy, and Canada, etc.
Therefore, this research is to investigate the relationship between ownership structure and firm performance of listed firms in Malaysia, mainly in the trade and service sector. This study was mainly to determine the relationship between ownership structure and firm performance in trade and service sectors in Malaysia. In the next chapter, the research conducted to determine the relationship between ownership structure and firm performance in Malaysia will be further elaborated.
LITERATURE REVIEW
- Introduction
- Review of literature
- Ownership Structure
- Firm Age
- Firm Size (Total Asset)
- Leverage
- Return on Asset (ROA)
- Return on Equity (ROE)
- Tobin’s Q
- Review of Relevant Theoretical Models
- Proposed Theoretical/Conceptual Framework
This result was similar to the result of Drakos & Bekiris (2010), where they showed that a high level of management ownership has a positive relationship with firm performance. Barzegar and Babu (2008) show that there is a significant negative relationship between firm performance and firm size at the 90% level. This result was in line with Kumar (2003), where he also found that the age and size of the firm have a positive effect on firm performance.
Using a sample of listed Chilean firms from the period 2000 to 2003, Silva and Majluf (2008) confirm that firm performance is based on ownership structure. Furthermore, they also found that there is a systematic relationship between the ownership structure and the company and profitability. This result was consistent with Kapopoulos and Lazaretou (2007) who also found that a linear positive relationship exists between firm profitability and firm ownership structure.
ROA ROE
Hypothesis Development
- Managerial ownership structure
- Non-Managerial Ownership Structure
Hu & Zhou (2008) use the firm age as one of the variables to determine the managerial ownership effect the performance. H0: There is no significant relationship between management ownership structure and debt to asset (leverage) ratio. The performance variable was represented by return on assets to determine the relationship between family ownership and firm performance (Maury, 2006).
Perrini, Rossi, & Rovetta (2008) used return on equity in their model to measure company performance. Ng, Yuce & Chen (2009) also use Tobin's Q as one of the variables in representing relative market value to determine whether or not there is a relationship between Tobin's Q and the ownership structure of 4315 privatized Chinese firms. Hu and Zhou (2008) used firm age as the independent variable to assess the relationship between non-managerial ownership structure and firm performance using a sample of non-listed Chinese firms in China.
Florackis, Kostakis & Ozkan (2009) used firm size as independent variable to estimate the relationship between non-management ownership structure and firm performance in a large sample of 1000 UK listed firms over the period 2000–2004. H0: There is no significant relationship between non-management ownership structure and debt to asset (leverage) ratio. H1: There is significant relationship between non-management ownership structure and debt to asset (leverage) ratio.
Fahlenbrach & Stulz (2009) used leverage as an independent variable to assess the relationship between non-managerial ownership structure and corporate performance with US firms from 1988 to 2003. Ben-Amar & Andre (2006) used return on assets as an independent variable to determine the relationship between ownership structure and firm performance from a set of 327 sample sizes in Canadian public companies over the periods 1998–2002. Barzegar & Babu (2008) also used return on equity as an independent variable to determine the relationship between ownership structure and firm performance using the top 50 firms listed on the Tehran Stock Exchange from 2001 to 2003 in the country of Iran.
Li, Sun, and Zou (2009) used Tobin's Q as an independent variable to determine the relationship between ownership structure and firm performance of a sample of 643 non-financial firms listed on Chinese stock exchanges.
Conclusion
METHODOLOGY
- Introduction
- Research Design
- Data Collection Methods
- Secondary Data
- Sampling Design
- Target Population
- Sampling Technique
- Sampling Size
- Data Processing
- Data Analysis
- Multiple linear regressions model
- Multicollinearity
- Autocorrelation
- Heteroscedasticity
- Normality of the Error Term
- F-Test Statistic
- T-Test Statistic
- Conclusion
Moreover, the data used for this research project is cross-sectional data where there are 70 companies that are from annual report of each of the companies listed in Bursa Malaysia within the year from 2008 to 2012. Secondary data was collected to analyze and comply with the requirements of the different research objectives. The data in balance sheet report and profit and loss report of the trade and services sector is extracted.
𝑌̂ refers to the ownership structure of the trade and services sector listed in Bursa Malaysia, 𝛽̂0 is the coefficient used to explain the degree that will affect business performance. If the null hypothesis is rejected, there is enough evidence to conclude that the model has an autocorrelation problem. Breusch-Godfrey serial correlation LM test usually allows to test the stochastic regressors, e.g. delayed values of the.
If the null hypothesis is rejected, there is enough evidence to conclude that the model has an autocorrelation problem. If the null hypothesis is rejected, there is sufficient evidence to conclude that the model has a heteroscedasticity problem. The first way to examine the normality of the error term is informally by using a scatter chart or a line chart.
Another way to detect the normality of the error term is through the formal way, the Jarque-Bera (JB) test. The null hypothesis of the F-Test statistic is that all coefficients are equal to zero. However, the alternative hypothesis is that one of the coefficients is not equal to zero.
The null hypothesis of the t-test statistic is that all coefficients are equal to zero.
DATA ANALYSIS
- Introduction
- Multiple Regression Model
- Managerial Ownership Model
- Non-Managerial Ownership Model
- Scale Measurement
- Multicollinearity
- Autocorrelation
- Heteroscedasticity
- Jarque-Bera Normality of the Error term
- Inferential Analyses
- Overall F-test
- Hypothesis Testing for Each of the Parameter (T-Test)
- Conclusion
Therefore, the researcher rejects the null hypothesis and has sufficient evidence to conclude that there is autocorrelation problem in the model at 5% significance level. To test the significant relationship between management ownership and company age, the researcher had conducted a hypothesis test at α = 0.05. To test the significant relationship between managerial ownership and company size, the researcher had conducted hypothesis testing at α = 0.05.
To test the significant relationship between managerial ownership and leverage, the researcher had conducted a hypothesis test at α = 0.05. To test the significant relationship between managerial ownership and asset return, the researcher had conducted a hypothesis test at α = 0.05. To test the significant relationship between managerial ownership and return on equity, the researcher had conducted a hypothesis test at α= 0.05.
To test the significant relationship between management ownership and Tobin's Q, the researcher had performed a hypothesis test at α = 0.05. To test the significant relationship between non-executive ownership and firm age, the researcher had performed a hypothesis test at α = 0.05. Therefore, the researcher concluded that there was insufficient evidence to conclude that firm age is significant at a 5% significance level.
To test the significant relationship between non-managerial ownership and firm size, the researcher had conducted hypothesis testing at α = 0.05. To test the significant relationship between non-managerial ownership and leverage, the researcher had conducted a hypothesis test at α = 0.05. To test the significant relationship between non-managerial ownership and return on asset, the researcher had conducted a hypothesis test at α = 0.05.
To test the significant relationship between non-management ownership and return on equity, the researcher conducted a hypothesis testing at α=0.05. Consequently, the researcher concludes that there is insufficient evidence to conclude that the return on equity is significant at the 5% significance level. To test the significant relationship between non-management ownership and Tobin's Q, the researcher conducted a hypothesis testing at α = 0.05.
DISCUSSION, CONCLUSION AND IMPLICATIONS
- Introduction
- Summary of Statistical Analyses
- Discussions of Major Findings
- Firm Age
- Firm Size
- Leverage
- Return on Assets (ROA)
- Return on Equity (ROE)
- Tobin’s Q
- Implications of the study
- Limitations of the study
- Recommendations for Future Research
- Conclusion
This research includes firm age as one of the variables to determine whether firm age has relation to firm ownership structure as well as firm performance. These results show that there is an insignificant negative correlation between the company's age and the ownership structure. This means that the company's age is not fully able to explain the company's ownership structure.
Demsetz & Lehn (1985) also found the same result with the study where they show that there is a negative relationship between the ownership structure and the firm size in 511 companies in American Corporations. This result showed that there is a negative and significant relationship between leverage and the ownership structure. This result shows that there is a negative and insignificant relationship between ownership structure and firm performance.
The researcher then found that there is a positive and insignificant relationship between ownership structure and return on equity (ROE). It shows that there is a positive relationship between Tobin's Q and ownership structure and it is significant at 10% significance level. However, Oluwatayo & Amole (2013) suggest that the relationship between ownership structure and firm performance was not a significant relationship using a sample of architectural firms from Nigeria.
The ownership structure will affect the performance of the company and therefore the profitability of the investor. Therefore, future researchers can conduct their research in all developed and developing countries to determine the relationship between ownership structure and firm performance. The purpose of this study is to determine the relationship between ownership structure and business performance in the trade and services sector in which the companies in Bursa Malaysia are listed.
As a conclusion of this study, this research can conclude that the firm size, leverage and Tobin's Q have a significant relationship with ownership structure of the company. Finally, this research achieved its objective by knowing the relationship between ownership structure and firm performance of trading and service sector listed in Bursa Malaysia. The relationship between ownership structure and firm performance: An empirical analysis of listed companies in Kenya.
