The Effect of Ownership Structure on Firm Performance Among Selected Ethiopian Companies
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Date
2023-06
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Addis Ababa University
Abstract
This paper explores and is about the effect of ownership structure on a firm performance among selected Ethiopian companies. The data collected for this research is for the period May-June,
2023 and the sample consists of 20 companies among which are 4 sole proprietorship, 6 partnership and 10 share companies. The general objective of the study was to determine the effect of ownership structures on firm performance of those companies. Three specific research questions are applied to explore and see the relationships between the ownership structure (characterized by owners’ identity and ownership concentration) and firm performance; 20 companies were selected randomly for this study and secondary data were gathered from the review of financial documents requested from responsible government organ.. Ownership concentration is measured and valued by the percentage of shares owned by the leading five shareholders and HHI while the performance measures applied are ROA and ROE. Correlation analysis's findings demonstrated that there is no statistically significant performance difference between solely owned, partner operated, and share companies. However, the examination of linear regression gave result that new businesses with a single owner do better than older businesses with a single owner. The second finding demonstrates the positive correlations between institutional, foreign ownership, and company performance indicators. While the association between government ownership and a firm's performance indicator shows a negative and indirect trend. Furthermore, the findings and results on the association between the four owners' identity factors and company or firm performance were the most conclusive. A positive direct correlation exists between foreign ownership and the company. There is no correlation between government ownership with business performance
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Keywords
Effect of ownership structure, Firm performance