Ownership structure and firm performance: evidence from Saudi Arabia

Abstract

Purpose

This study aims to examine the impact of ownership structure variables on the performance of Saudi listed firms.

Design/methodology/approach

The impact of ownership structure variables on firm performance is examined using fixed effects and dynamic panel generalised method of moments regression approaches for 70 listed firms over the period 2016–2021. Ownership structure variables are captured by examining government, institutional, insider, foreign and family ownership, and firm performance is gauged in terms of the accounting-based measures of return on assets and the return on equity and the market-based measures of Tobin’s Q and the market-to-book ratio.

Findings

The results show that government, institutional, insider and foreign ownership all positively affect both accounting and market-based performance measures, whereas family ownership exerts a negative impact across the models. The findings support resource dependence theory, agency theory and alignment effects arguments.

Practical implications

The findings have significant implications for Saudi regulators in their effort to improve domestic capital market efficiency and investor protection, while also highlighting the need for a corporate governance code to safeguard minority shareholders. The results demonstrate that government, institutional, insider and foreign ownership exert an important impact on firm operational and market performance.

Originality/value

This study expands the literature by examining how ownership structure variables affect performance in an interesting developing country corporate context.

Citation

Boshnak, H.A. (2023), "Ownership structure and firm performance: evidence from Saudi Arabia", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-11-2022-0422