The Effects of Insider Ownership and Board Composition on Firm Performance in the Restaurant Industry

Abstract

This study aimed to investigate the relations among insider ownership, board composition, and firm performance in U.S. restaurant firms. The authors divided insider ownership into three categories: the equity ownership held per insider owners, the equity ownership held by nonexecutive (outside) directors, and the equity ownership shared by executive officers. Board composition was represented by board independence, board size, and chief executive officer duality. For data analysis, the authors conducted 319 observations from 31 firms. The authors found that 3 categories of insider ownership and board composition variables differently influence short-term operational profitability and long-term value. Managerial ownership negatively influences short-term profitability, whereas long-term value is affected not only by managerial ownership but also by a balanced dispersion of shares to each owner. Dual chief executive officers do not affect short-term profitability but negatively influence long-term value. The study findings provide more comprehensive understanding of the effect of the corporate governance system on firm performance in the restaurant industry.

Effects of board characteristics, audit committee and risk management on corporate performance: evidence from Palestinian listed companies

“…Thus, the hypothesis (H1) is supported. The result indicates that higher board ownership can reduce agency costs and leads to arise corporate performance because of the divergence of interests between directors and shareholders (Jensen and Meckling, 1976) and it is also supporting the finding of Mahmud et al (2010), Piesse et al (2005), while the result is inconsistent with the finding of Im and Chung (2017). Notes: *Significant at the 0.1 level; **significant at the 0.05 level; ***significant at 0.01 level; for the definition of variables refer to Table 1 Evidence from Palestinian listed companies Board independence has a positive and significant impact on corporate performance, thus hypothesis (H5) is supported.…”

“…Bhabra (2007) also finds that the effect of the performance is non-linearly related to board ownership. Im and Chung (2017) find a negative relationship between board ownership with corporate performance. Basically, it is hypothesized that: H1.…”

Ownership structure and performance of professional service firms in a declining industry: Evidence from Vietnamese securities firms

“…However, according to the entrenchment hypothesis, high insider ownership tends to reduce the effectiveness of management control and shareholders experience more severe expropriation (Morck, Shleifer, & Vishny, 1988). In the service sector, empirical evidence of the two hypotheses is mixed (M.-H. Chen, Hou, & Lee, 2012;Gu & Kim, 2001;Im & Chung, 2017;Park & Jang, 2010). In this study, we hypothesize that insider ownership has a relationship with firm performance.…”

Family Ownership, Asset Levels, and Firm Performance in Western European Hospitality Companies

“…They further suggest that institutional shareholders prefer companies displaying a low leverage, good performance, and larger size. Similarly, Kim, Dalbor, and Feinstein (2007) find that for U.S. restaurants profit margins are positively influenced by ownership structures, while Im and Chung (2017) show that managerial ownership negatively affects profitability in the short run.…”

“…These notably include articles by Anderson and Reeb (2003), Fahlenbrach (2009), King and Santor (2008), Pérez-González (2006) or Villalonga and Amit (2006) in North America; Bertrand et al (2002), Carney and Child (2013) or Claessens et al (2000) in Asian countries and Andres (2008), Barontini and Caprio (2006), Maury (2006), Sraer and Thesmar (2007) or Thomsen and Pedersen (2000) in Europe. Im and Chung (2017) show that managerial ownership negatively affects profitability in the short-run.…”