![International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-12, Issue-3 (June 2022)
www.ijemr.net https://doi.org/10.31033/ijemr.12.3.19
134 This work is licensed under Creative Commons Attribution 4.0 International License.
It was found from table 5 that for overall the Non
institutional Ownership alone has significant impact on
Asset Utilization ratio whereas foreign promotor holding,
Shares held by the custodian, public shareholding and
Indian promotor holding has no significant impact on
Asset Utilization ratio.
Table 6: Factors Influencing Ownership Pattern – Multiple Regression - ALL INDUSTRIES TOGETHER – DEPENDENT
VARIABLE: INDIAN PROMOTOR - INDIAN PROMOTOR > 50% AND INDIAN PROMOTOR < 50%
Variables INDIAN PROMOTOR > 50%
INDIAN PROMOTOR < 50%
ROE - -
DER - Significant impact
BOARD_SIZE
Significant impact -
BINDEP - Significant impact
LNMC
Significant impact
-
From table 6, if Indian promotor holding is more
than 50%, Board size and Size of the company has
significant impact on Indian promotor holding where as if
it is less than 50%, Debt equity ratio and Percentage of
independent directors on the board has significant impact
on Indian promotor holding.
Table 7: Impact of Ownership pattern on Corporate Performance – Multiple Regression - ALL INDUSTRIES TOGETHER –
DEPENDENT VARIABLE: ASSET UTILIZATION RATIO - AUR > 50% AND AUR < 50%
VARIABLES AUR > 50% AUR < 50%
IND_PROM - -
FOR_PRO - -
PSH - -
SHARE_CUSTODIAN - -
NONINSTOWN Significant Impact Significant Impact
It was found from table 7, that non institutional
ownership alone has significant impact on Asset
Utilization ratio if it is less than 50% and more than 50%.
IV. CONCLUSION
There is significant positive relationship between
no of independent direction and firm performance. This
shows the independent directors take decision without any
hindrance and that improves company’s financial
performance. Firms can increase and maintain.
Independent directors’ numbers for the companies benefit.
Negative significant relationship between DER and Board
independence also proves that independent directors insist
more that independent directors insist more on using
retained earnings than outside financing. There is
significant negative relationship between public
shareholding and AUR and significant positive
relationship between Indian promotors and AUR. This
shows that increased PSH leads to more distribution of
earnings to shareholders in the form of dividend and leads
to decreased AUR. The companies should try to reduce
PSH by Share buyback and increase promotor holding for
increased companies’ performance. Board Independence
and Size of the company has significant impact on
ownership pattern. DER has an Impact on all the industries
on the factors influencing ownership pattern the companies
should try maintain optimum debt equity ratio which
should increase financial performance and shareholder
wealth. Influence of ownership pattern factors on Indian
promotors is more for automobile companies which shows
that this industry performance depends more on ownership
pattern. IT Industry asset utilization rate is impacted by all
the ownership pattern and its factors. Foreign promotors
play a major impact in IT Industry performance & Growth.
This shows the relationship between shareholding pattern
and corporate performance increase in foreign promotor
ownership institutional and non-institutional ownership
reduces agency cost.
REFERENCES
[1] Agarwal, Shubhi. (2020). Shareholding pattern and its
impact on corporate performance. Available at:
https://ssrn.com/abstract=3799990](https://image.slidesharecdn.com/ijemr2022120319-220627081220-cf14e9cd/85/Factors-Influencing-Ownership-Pattern-and-its-Impact-on-Corporate-Performance-of-Selected-Indian-Companies-4-320.jpg)
![International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962
Volume-12, Issue-3 (June 2022)
www.ijemr.net https://doi.org/10.31033/ijemr.12.3.19
135 This work is licensed under Creative Commons Attribution 4.0 International License.
[2] Banik, A. & Chatterjee, C. (2021). Ownership pattern
and governance–performance relation: Evidence from an
emerging economy. Global Business Review, 22(2), 422-
441.
[3] Cornett, M. M., Marcus, A. J., Saunders, A. &
Tehranian, H. (2007). The impact of institutional
ownership on corporate operating performance. Journal of
Banking & Finance, 31(6), 1771-1794.
[4] Jeet, D. (2020). The relationship between women
directors on board and firm performance: Indian
scenario. IUP Journal of Corporate Governance, 19(3),
23-38.
[5] Jeet, D., Bhatia, B. S. & Sharma, R. K. (2020).
Determinants of ownership pattern. Journal of
Management Research and Analysis, 5, 146-153.
[6] Mak, Y. T. & Li, Y. (2001). Determinants of corporate
ownership and board structure: evidence from
Singapore. Journal of Corporate Finance, 7(3), 235-256.
[7] Short, H., Keasey, K. & Duxbury, D. (2002). Capital
structure, management ownership and large external
shareholders: a UK analysis. International Journal of the
Economics of Business, 9(3), 375-399.](https://image.slidesharecdn.com/ijemr2022120319-220627081220-cf14e9cd/85/Factors-Influencing-Ownership-Pattern-and-its-Impact-on-Corporate-Performance-of-Selected-Indian-Companies-5-320.jpg)
Factors Influencing Ownership Pattern and its Impact on Corporate Performance of Selected Indian Companies
- 1. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.19 131 This work is licensed under Creative Commons Attribution 4.0 International License. Factors Influencing Ownership Pattern and its Impact on Corporate Performance of Selected Indian Companies Janaki S1 and Dr. P.G. Thirumagal2 1 MBA, School of Management Studies, VISTAS, INDIA 2 Associate Professor, School of Management Studies, VISTAS, INDIA 2 Corresponding Author: [email protected] ABSTRACT This study on factors influencing Ownership pattern and its impact on corporate performance has used five industries data viz Automobile industry, IT industry, Banking industry, Oil & Gas industry and pharmaceutical industry for five years from 2017 to 2021. First the factors influencing ownership pattern was identified and later its impact on corporate performance was analysed. Multiple Regression, ANOVA and Correlation was used in SPSS 28. Percentage of independent directors on the board and size of the company has significant impact on Indian Promotor holding and non-institutional ownership has significant impact on corporate performance. Keywords-- Asset Utilization Ratio, Ownership Pattern, Public Shareholding, Board Independence, Board Size I. INTRODUCTION Shareholding of a company can be classified as either ownership with individual shareholders mainly or majority of the holding with promotors. Domestic Institutional Investors and Foreign Institutional Investors also form a part of the shareholding pattern of the companies. This is study is very important which focus on identifying the factors that influences the ownership pattern and in turn how it affects the corporate performance. Many literature survey confirmed the impact of shareholding pattern on corporate performance. The objective of the study is to identity the factors influencing ownership pattern, to analyze the impact of ownership pattern on corporate performance and to find the relationship between the study variables. II. MATERIALS AND METHODS Mak, Y. T., & Li, Y. (2001) empirically found that there was a relationship between board structure and shareholding pattern. Duality has positive relationship with Block holder ownership. Short, H., Keasey, K., & Duxbury, D. (2002). This paper provides evidence on the positive relationship of debt ratio with ownership by management and negative relationship with large external shareholders. This proves that large external shareholders presences affect the agency cost. Cornett, M. M., Marcus, A. J., Saunders, A., & Tehranian, H. (2007). found that institutional investors with potential business relations have significant impact on the operating cash flow returns. Agarwal, S., & Singh, A. (2020) It was found that FII, ISH and Non institutional ownership have significant impact whereas Shares held by the custodian and Indian promotor holding were insignificant with corporate performance. This study was carried out for 30 firms for the period of 2007 to 2019. Jeet, D. (2020) found that there was a positive relationship between women on board of directors and firm performance. ROA and TOBINS Q was used as measure for firm performance. Jeet, D., Bhatia, B. S., & Sharma, R. K. (2020) empirically examined the determinants of shareholding pattern. Indian promotor holding and foreign promotor holding was used as dependent variables. Firm performance and duality has significant positive impact on shareholding pattern. Banik, A., & Chatterjee, C. (2021), based on the GMM (Generalized Method of Moments, more executive salary led to firm performance and companies with more promotor holding creates more value creation and Domestic Institutional Investors have significant impact on the performance of firms. Five industries were selected viz Automobile industry, IT industry, Banking industry, Oil & Gas industry and pharmaceutical industry. In Automobile industry, Maruti Suzuki India limited, TVS motor company limited, Tata motors limited, Eicher motors limited and Ashok Leyland limited were selected. In IT Industry, Tata Consultancy Services Limited, Infosys Limited, Wipro Limited, HCL Technologies Limited and Tech Mahindra Limited and in Banking industry , HDFC Bank Limited, Kotak Mahindra Bank Limited, ICICI Bank Limited, Axis Bank Limited, IndusInd Bank Limited, State Bank of India, Bank of Baroda and Punjab National Bank were selected. In Oil & Gas industry, Bharat Petroleum Corporation Limited, Reliance Industries Limited, Oil and Natural Gas Corporation Limited, Petronet LNG Limited and Indian Oil Corporation Limited and from pharmaceutical industry CIPLA Limited, Aurobindo Pharma Limited, Lupin Limited, Sun Pharmaceutical
- 2. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.19 132 This work is licensed under Creative Commons Attribution 4.0 International License. Industries Limited and Cadila Healthcare Limited were selected. Five years data from 2017 to 2021 were collected from www.nseindia.com, www.moneycontrol.com and from the companies’ annual reports. All the companies were selected based on market capitalization. Tools used were One way ANOVA, Correlation and Multiple Regression was used for the analysis. SPSS 28 was used for the analysis. To find the factors influencing the ownership pattern the following variables were used. IND_PRO = INDIAN PROMOTORS (Dependent Variable) and independent variables are ROE = RETURN ON EQUITY, DER = DEBT EQUITY RATIO, BOARD_SIZE = NO OF BOARD DIRECTOR, BINDEP = PERCENTAGE OF INDEPENDENT DIRECTOR IN BOARD and SIZE_MC = SIZE OF MARKET CAPITALIZATION. IND_PRO = β1ROE+ β2DER+ β3BOARD_SIZE + β4BINDEP + β5SIZE_MC+c To find the impact of ownership pattern on corporate performance, the variables used are AUR = ASSET UTILIZATION RATIO (Dependent Variable) and independent variables are IND_PRO = INDIAN PROMOTORS, FOR_PRO = FOREIGN PROMOTORS, PSH = PUBLIC SHAREHOLDING, SHARE_CUSTODIAN = SHARE HELD BY CUSTODIAN and NON_ISH = NON - INSTITUTIONAL SHAREHOLDING AUR = β1NONINSTOWN+ β2FOR_PROM+ β3SHARE_CUSTODIAN + β4PSH + β5IND_PRO+c III. RESULTS AND DISCUSSION One way ANOVA has performed to find out the difference in the selected variables between the selected companies. Table 1: One way ANOVA – Selected variables PARTICULARS P VALUE INFERENCE ROE 0.000 Significant Difference BOARD_SIZE 0.000 Significant Difference PSH 0.000 Significant Difference AUR 0.000 Significant Difference It was found from Table 1 that there is significant difference in ROE, Board Size, PSH and AUR of the selected Indian companies. Table 2: Relationship between factors influencing the ownership pattern variables IND_PRO ROE DER BOARD_SIZE BINDEP SIZE_MC IND_PRO . .215 .355 .275 .000 .000 ROE .215 . .000 .449 .036 .004 DER .355 .000 . .406 .002 .001 BOARD_SIZE .275 .449 .406 . .040 .225 BINDEP .000 .036 .002 .040 . .082 SIZE_MC .000 .004 .001 .225 .082 . From Table 2, there is Significant relationship between Indian promoter holding with Percentage of independent directors on the board and size of the company. Return on Equity has significant relationship with Debt Equity ratio, Percentage of independent directors on the board and size of the company and Debt Equity Ratio has significant relationship with Percentage of independent directors on the board and size of the company and Board Size has significant relationship with Percentage of independent directors on the board.
- 3. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.19 133 This work is licensed under Creative Commons Attribution 4.0 International License. Table 3: Relationship between impact of ownership pattern on corporate performance variables AUR NONINSTOWN FOR_PROM SHARE_CUSTODIAN PSH IND_PROM AUR . .164 .105 .008 .001 .017 NONINSTOWN .164 . .078 .000 .000 .000 FOR_PROM .105 .078 . .458 .491 .000 SHARE_CUSTO DIAN .008 .000 .458 . .000 .000 PSH .001 .000 .491 .000 . .000 IND_PROM .017 .000 .000 .000 .000 . From Table 3, there is Significant relationship between Asset Utilization Ratio with Shares held by the Custodian, Public Shareholding and Indian promotor holding. Non-Institutional Ownership has significant relationship with Shares held by the Custodian, Public Shareholding and Indian promotor holding. Foreign promotor holding has significant relationship with Indian promotor holding. Shares held by the Custodian has significant relationship with Public Shareholding and Indian promotor holding. Public Shareholding has significant relationship with Indian promotor holding. Table 4: Factors Influencing Ownership Pattern – Multiple Regression - ALL INDUSTRIES TOGETHER AND INDIVIDUAL INDUSTRY – DEPENDENT VARIABLE: INDIAN PROMOTOR PATICULARS OVERALL AUTO IT PHARM OIL AND GAS BANKING ROE - Significant impact Significant impact - - - DER - Significant impact Significant impact - Significant impact Significant impact BOARD SIZE - Significant impact - - - - BOARD INDEPENDENCE Significant impact Significant impact - Significant impact - Significant impact SIZE MC Significant impact Significant impact - - - - It was found from table 4 that for overall the Percentage of independent directors on the board and size of the company has significant impact whereas Board Size, Debt Equity ratio and Return on Equity were insignificant factors on Indian Promotor holding. Table 5: Impact of Ownership pattern on Corporate Performance – Multiple Regression - ALL INDUSTRIES TOGETHER INDIVIDUAL INDUSTRY – DEPENDENT VARIABLE: ASSET UTILIZATION RATIO PATICULARS OVERALL AUTO IT PHARM OIL AND GAS BANKING NON- INSTITUTION Significant impact - Significant impact - - - FOREGIN PROMOTER - Significant impact Significant impact - - - SHARE CUSTODIAN - - Significant impact - Significant impact - PSH - Significant impact Significant impact - - - INDIA PRO - Significant impact Significant impact Significant impact - -
- 4. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.19 134 This work is licensed under Creative Commons Attribution 4.0 International License. It was found from table 5 that for overall the Non institutional Ownership alone has significant impact on Asset Utilization ratio whereas foreign promotor holding, Shares held by the custodian, public shareholding and Indian promotor holding has no significant impact on Asset Utilization ratio. Table 6: Factors Influencing Ownership Pattern – Multiple Regression - ALL INDUSTRIES TOGETHER – DEPENDENT VARIABLE: INDIAN PROMOTOR - INDIAN PROMOTOR > 50% AND INDIAN PROMOTOR < 50% Variables INDIAN PROMOTOR > 50% INDIAN PROMOTOR < 50% ROE - - DER - Significant impact BOARD_SIZE Significant impact - BINDEP - Significant impact LNMC Significant impact - From table 6, if Indian promotor holding is more than 50%, Board size and Size of the company has significant impact on Indian promotor holding where as if it is less than 50%, Debt equity ratio and Percentage of independent directors on the board has significant impact on Indian promotor holding. Table 7: Impact of Ownership pattern on Corporate Performance – Multiple Regression - ALL INDUSTRIES TOGETHER – DEPENDENT VARIABLE: ASSET UTILIZATION RATIO - AUR > 50% AND AUR < 50% VARIABLES AUR > 50% AUR < 50% IND_PROM - - FOR_PRO - - PSH - - SHARE_CUSTODIAN - - NONINSTOWN Significant Impact Significant Impact It was found from table 7, that non institutional ownership alone has significant impact on Asset Utilization ratio if it is less than 50% and more than 50%. IV. CONCLUSION There is significant positive relationship between no of independent direction and firm performance. This shows the independent directors take decision without any hindrance and that improves company’s financial performance. Firms can increase and maintain. Independent directors’ numbers for the companies benefit. Negative significant relationship between DER and Board independence also proves that independent directors insist more that independent directors insist more on using retained earnings than outside financing. There is significant negative relationship between public shareholding and AUR and significant positive relationship between Indian promotors and AUR. This shows that increased PSH leads to more distribution of earnings to shareholders in the form of dividend and leads to decreased AUR. The companies should try to reduce PSH by Share buyback and increase promotor holding for increased companies’ performance. Board Independence and Size of the company has significant impact on ownership pattern. DER has an Impact on all the industries on the factors influencing ownership pattern the companies should try maintain optimum debt equity ratio which should increase financial performance and shareholder wealth. Influence of ownership pattern factors on Indian promotors is more for automobile companies which shows that this industry performance depends more on ownership pattern. IT Industry asset utilization rate is impacted by all the ownership pattern and its factors. Foreign promotors play a major impact in IT Industry performance & Growth. This shows the relationship between shareholding pattern and corporate performance increase in foreign promotor ownership institutional and non-institutional ownership reduces agency cost. REFERENCES [1] Agarwal, Shubhi. (2020). Shareholding pattern and its impact on corporate performance. Available at: https://ssrn.com/abstract=3799990
- 5. International Journal of Engineering and Management Research e-ISSN: 2250-0758 | p-ISSN: 2394-6962 Volume-12, Issue-3 (June 2022) www.ijemr.net https://doi.org/10.31033/ijemr.12.3.19 135 This work is licensed under Creative Commons Attribution 4.0 International License. [2] Banik, A. & Chatterjee, C. (2021). Ownership pattern and governance–performance relation: Evidence from an emerging economy. Global Business Review, 22(2), 422- 441. [3] Cornett, M. M., Marcus, A. J., Saunders, A. & Tehranian, H. (2007). The impact of institutional ownership on corporate operating performance. Journal of Banking & Finance, 31(6), 1771-1794. [4] Jeet, D. (2020). The relationship between women directors on board and firm performance: Indian scenario. IUP Journal of Corporate Governance, 19(3), 23-38. [5] Jeet, D., Bhatia, B. S. & Sharma, R. K. (2020). Determinants of ownership pattern. Journal of Management Research and Analysis, 5, 146-153. [6] Mak, Y. T. & Li, Y. (2001). Determinants of corporate ownership and board structure: evidence from Singapore. Journal of Corporate Finance, 7(3), 235-256. [7] Short, H., Keasey, K. & Duxbury, D. (2002). Capital structure, management ownership and large external shareholders: a UK analysis. International Journal of the Economics of Business, 9(3), 375-399.