Does ownership affect a firm's performance and default risk in Jordan?

Abstract

Purpose-This paper seeks to examine the impact of ownership structure on firm performance and the default risk of a sample of publicly listed firms. Design/methodology/approach-This paper examines the impact of ownership structure on firm performance and the default risk of a sample of 59 publicly listed firms in Jordan from 1989 to 2002. Findings-The main findings were: ownership structure has significant effects on the accounting measure of performance return on assets (ROE); government shares are significantly negatively related to the firm's performance ROE; defaulted firms have a high concentration ownership compared with nondefaulted firms and also high foreign ownership firms have a low incidence of default; government ownership is significantly negatively related to the firm's probability of default; both mix and concentration ownership structure data can be used to predict the probability of default as the largest five shareholders (C5) and government ownership fraction (FGO) are significantly negatively correlated with the probability of the default. These results further suggest that reducing government ownership can increase a firm's performance but will also cause some firms to go bankrupt, at least in the short term. Originality/value-This paper provides useful information on the impact of ownership structure on firm performance and the default risk of a sample of publicly-listed firms.

Corporate Governance Mechanisms, Privatization Method and the Performance of Privatized Companies in Jordan

“…Consistent with this finding, in the context of MENA countries, a study by Ben Naceur et al (2007) suggests that significant increases in profitability and operating efficiency occur when the government relinquishes control and when there is increases in foreign ownership. Retaining state ownership and control appears to be associated with inefficiency and value destruction in privatized companies (Boubakri et al 2009;Zeitun 2009;Zeitun & Tian 2007). According to the Executive Privatization Commission of Jordan, the government has the tendency to retain control over privatized companies (PL 2000).…”

Managerial ownership, capital structure and firm value

“…Also, recent studies of corporate governance suggest that geographical position, the tax system, industrial development, and cultural characteristics, along with other factors, affect ownership structure which in turn impacts on a firm's performance and its failure (Pedersen and Thompson, 1997). Therefore, this study is important as it provides evidence from the emerging markets and, more specifically, from Middle Eastern countries using Jordan as a case study 44 . The Amman Stock Exchange (ASE) provides some evidence about the ownership structure of the companies traded on the ASE.…”

Corporate Governance Practices and Audit Quality: An Empirical Study of the Listed Companies in Egypt

“…The banking and insurance sectors are not included in this study as the characteristics of these firms are different from the firms in other industrial sectors in terms of financial statement profitability measures and liquidity assessment. Also, they were specialized in nature and were subject to different regulations, tax and accounting rules [31]. This gave us a …”