Impact of Ownership Structure On Shareholder’s Value

The primary objective of the study is to understand the effect of ownership structure of a firm on the shareholder’s value appropriation which indicates firm’s performance. We are considering 100 companies that are listed on the National Stock Exchange belonging to various sectors with respective data for financial years i.e. 1st April 2015 to 31st March 2019. According to previous researches, a firm’s performance is based not only on its investment projects but also on other factors such as dividend policy, ownership structure. In this study we are trying to establish a relation between the ownership structure and how it adds value to a firm which as a result maximizes shareholder’s value. Firms with different ownership forms tend to optimize different goals that can affect their strategies and performance. Furthermore, we support the hypothesis that the identity of large owners- family, bank, institutional investor, government, and other companies- has important implications for corporate strategy and firm’s efficiency. 

The equation we have used to understand the firm’s ownership structure is as follows,

1-percentage holdings by promoters = Free Float

Where, Free Float = percentage holdings by public + percentage holdings by domestic institutions + percentage holdings by foreign institutions.

We have plotted the independent variable i.e. in this case the ownership structure against the dependent variable i.e.in this case the shareholder’s value and have tried to analyze using respective data of several companies over a certain period of time. Also we have assigned few proxy parameters to measure shareholder’s value and firm’s performance. Proxy parameter for shareholder’s value is considered to be the Returns on Net Worth(RONW). Firm’s performance can be reflected from the sales growth rate over the years and P/E ratio i.e. price to the company’s earnings per share.

Anusua Das
Tanumoy Sengupta
PGDM Batch 2018-20