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

Rami Zeitun, Gary Gang Tian*

*Corresponding author for this work

Research output: Contribution to journalArticle

61 Citations (Scopus)

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 non-defaulted 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.

Original languageEnglish
Pages (from-to)66-82
Number of pages17
JournalCorporate Governance
Volume7
Issue number1
DOIs
Publication statusPublished - 2007
Externally publishedYes

Keywords

  • Corporate governance
  • Corporate ownership
  • Default
  • Emerging markets
  • Jordan
  • Organizational structure

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