Ownership & Financial Performance Study
-
Upload
ahtersonmez -
Category
Documents
-
view
63 -
download
2
Transcript of Ownership & Financial Performance Study
![Page 1: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/1.jpg)
Ownership Structure &
Financial Performance
Ahter SönmezTarık Temelkök
![Page 2: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/2.jpg)
Introduction
•In the academic literature, we have seen that there has been continuos debate about this topic but not a total consensus
•We will base our hypotheses suggesting that there exists a causal relationship between them
![Page 3: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/3.jpg)
Why it’s important?
We’re trying to answer:
•What should be the most efficient ownership structure?
•How does ownership concentration influence the performance ?
•Knowing the relationship between ownership structure and financial performance could help the investors to gain value by optimizing the firm’s ownership structure !!
![Page 4: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/4.jpg)
Two sides of the Coin
•+, Ownership concentration would prevent certain problems that can emerge out of divergence of interests
•-, Separation between professional management and ownership can be beneficial
![Page 5: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/5.jpg)
Professional Management
•complex organizational structures could be handled
•risk can be diversified among shareholders
•large funds to acquire specific assets can be obtained
![Page 6: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/6.jpg)
Academical Theory Behind
•Transaction Cost Theory (Originally1937)
•Corporate Governance Theory
•Principle-Agent Theory
•preference of the principal is profit maximization
•preference of the agent is utility maximization
![Page 7: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/7.jpg)
Source: Luzhen Chen, Msc Thesis, Aarhus School of Business. Aarhus University
![Page 8: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/8.jpg)
More on the subject
•Ownership structure is believed to influence firm performance through its influence on the principal-agent relationships
•The literature review on ownership structure is divided into two themes:
•ownership concentration
•owner identity
![Page 9: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/9.jpg)
Source: Luzhen Chen, Msc Thesis, Aarhus School of Business. Aarhus University
![Page 10: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/10.jpg)
Ownership Concentration vs.
Owner Identity•Ownership concentration
provides quantitative information about the capital right of the largest shareholders
•Owner identity information provides qualitative information about the character of the controlling shareholders
![Page 11: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/11.jpg)
Firm Performance Criteria
•Firm Valuation
•Firm profitability & efficiency
•Growth
•Risk (Sector)
![Page 12: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/12.jpg)
Criteria Calculation
•Firm valuation is measured by Tobin’s Q
•Firm profitability is measured by Return on Equity (ROE & ROA)
•Firm growth: we look at assets
![Page 13: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/13.jpg)
Source: Luzhen Chen, Msc Thesis, Aarhus School of Business. Aarhus University
![Page 14: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/14.jpg)
Analysis
![Page 15: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/15.jpg)
Methodology•We have comprehensively researched
academic sources for the topic (Jstor, Google Scholar)
•This review of the literature yielded different and inconsistent results and no total consensus among the researchers
•We decided to make our own model and analysis (for Turkey)
![Page 16: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/16.jpg)
Methodology con’t• We chose non-financial Turkish firms quoted in Istanbul Stock
Exchange between 2009-2012
• Yearly data, of 17 companies
• We modeled the ownership structure as an endogenous relationship, with respect to 16 variables (12 independent, 4 dependent)
• About concentration of shareholders
• Percentage of shares owned by management
• Other financial variables (more on the coming up slides)
• We collected data and entered them manually in excel tables & E-Views software
• We applied statistical techniques
• Ordinary least square regression (OLS)
![Page 17: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/17.jpg)
Endogenous vs. Exogenous Ownership• Endogenous structure (factor) means that
ownership is determined “inside” the firm
• Exogenous structure (factor) means that ownership is determined “outside” the firm
• size of the industry
• the regulatory climate
• risk involved
• the degree of financial leverage
![Page 18: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/18.jpg)
List of Companies• Anadolu Efes İçecek
• Arçelik Aş.
• Banvit
• Boyner Mağzacılık
• Carefour
• Derimod
• Doğuş Otomativ
• Ezcacıbaşı Yapı
• Enka İnşaat
• Ereğli Demirçelik
• Karsan Otomativ
• Türk Hava Yolları
• Tuborg
• Turkcell
• Türk Telekom
• Ülker
• Vakko
![Page 19: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/19.jpg)
Source of Data
•Kamuyu Aydınlatma Platformu (KAP.gov.tr)
•Individual Websites of the Companies Analyzed
•Websites of Financial Information
![Page 20: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/20.jpg)
Manually Collected & Entered Data
![Page 21: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/21.jpg)
Common Beliefs About Turkish Companies
That they are characterized by:
•high ownership concentration
•presence of dominant shareholders
•active financial intermediaries
•weak external control mechanisms & transparency
![Page 22: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/22.jpg)
Analysis Models
• For performance criteria we have 4 models; ROA, ROE, Growth and Tobin’s Q
• ROAit = αit+β1S1it+ β2S2it+ β3S3it+ β4POit+ β5FIit+ β6MSit+ β7SAit+ β8Lit+ β9BDit+ β10Ait+ εit
• ROEit = αit+β1S1it+ β2S2it+ β3S3it+ β4POit+ β5FIit+ β6MSit+ β7SAit+ β8Lit + β9BDit+ β10Ait+ εit
• TobinQit = αit+β1S1it+ β2S2it+ β3S3it+ β4POit+ β5FIit+ β6MSit+ β7SAit+ β8Lit + β9BDit+ β10Ait+ εit
• Growthit = αit+β1S1it+ β2S2it+ β3S3it+ β4POit+ β5FIit+ β6MSit+ β7SAit+ β8Lit+ β9BDit+ β10Ait+ εit
![Page 23: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/23.jpg)
By such nature of the Turkish companies; we selected the following criteria for the model:
•S1, biggest shareholder’ share
•S2, the biggest two shareholders’ share
•S3, the biggest three shareholders’ share
•PO, public shares
•FI, foreign shareholders’ shares
•MS, managers shares
•SA, sales
•L, leverage (debt/total assets)
•BD, Number of Board of Directors (Regular / Independent BoD)
•A, Company Age
![Page 24: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/24.jpg)
The Model
![Page 25: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/25.jpg)
Correlation Matrix
![Page 26: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/26.jpg)
Regression
![Page 27: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/27.jpg)
Results•According to the regression results,
ownership concentration has positive correlation with financial performance of a company in the model in which Tobin’s Q is dependent.
•Therefore, less shareholders there are in a company, better performance it tends to show
![Page 28: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/28.jpg)
Results con’t
•Higher ownership concentration also means lower public share
•In the companies with high ownership concentration accordingly low public share, professionals tend to utilize the sources more productively
![Page 29: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/29.jpg)
Results con’t
In four of the models,
•Foreign shares and managers’ shares have no significant effect on financial performance.
![Page 30: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/30.jpg)
ConclusionsFrom our empirical results:
•Specific variables related to ownership structure have effect on financial performance
• It is important to take especially the ownership concentration and public share into account while studying the financial performance of companies
![Page 31: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/31.jpg)
Conclusions con’t•In further studies, researchers can
deepen in investigating indirect control of shareholders:
•via holdings who own the companies
•via other members of the family
•via other companies/intermediaries
![Page 32: Ownership & Financial Performance Study](https://reader038.fdocuments.in/reader038/viewer/2022103017/55648d2ed8b42a361d8b54e8/html5/thumbnails/32.jpg)
Questions
•Thank you...