Effect Of Proprietorship Structure On Firm Execution Using Financial Leverage As A Mediating Factor: Non-Financial Listed Firms In Pakistan Stock Exchanges
Keywords
Financial leverage, Managerial ownership, family ownership, institutional ownership, Concentration ownership and firm performance
Abstract
The main objective of this study is to determine the effect of financial leverage as a mediating variable on the relationship between ownership structure (managerial, family, concentrated, and institutional ownership) and the performance of non-financial organizations listed on the Pakistan Stock Exchange.
To examine the hypothesis, ordinary least squares regression is used. The data for this research were collected from companies listed on the Pakistan Stock Exchange. However, panel data were available for only 296 non-financial organizations during the period from 2011 to 2020.
The research results show that ownership structure negatively impacts corporate financial performance. Additionally, financial leverage explains the relationship between ownership structure (managerial, family, concentrated, and institutional ownership) and corporate financial performance.
It is recommended that investors and other users of financial statements improve the quality of their portfolio decisions by considering the indirect effect of financial leverage on the relationship between ownership concentration and firms’ performance, in addition to the direct effect of ownership structure (managerial, family, concentrated, and institutional ownership) on firm performance.
The research is novel as it presents mixed outcomes that reflect the poor and weak implementation of the corporate governance code among Pakistani firms, which is a matter of concern in developing countries like Pakistan.