Comparative study on the impact of individual and institutional ownership on firm performance: Evidence from Pakistan Stock Exchange

Muhammad Sadil Ali; Lubna Riaz; Wasif Anis

doi:10.47264/idea.jhsms/2.2.11

Authors

Muhammad Sadil Ali Department of Business Administration, Allama Iqbal Open University, Islamabad, Pakistan. https://orcid.org/0000-0003-3903-9757
Lubna Riaz Department of Business Administration, Allama Iqbal Open University, Islamabad, Pakistan. https://orcid.org/0000-0002-7005-2469
Wasif Anis Department of Management Science, Women University Swabi, Swabi, Pakistan | Institute of Management Studies, University of Peshawar, Peshawar, Pakistan. https://orcid.org/0000-0001-6214-8615

DOI:

https://doi.org/10.47264/idea.jhsms/2.2.11

Keywords:

firm performance, institutional ownership, individual ownership, financial leverage, firm size, non-financial companies, random effects model

Abstract

The study aims to examine the relationship between individual ownership, institutional ownership and firm performance. Further it comparatively analyses the impact of both institutional and individual ownership on firm performance. For this purpose, data have been collected from 64 firms listed on Pakistan Stock Exchange (PSX) for the period of 10 years (2011 - 2020). Random effects model has been employed to test the research hypotheses. This study compares the effect of individual and institutional ownership on firm performance. Result of the study shows that both institutional and individual ownership significantly affect firm performance. However, the degree of the effect is different for both individual and institutional investors. The institutional ownership influences the firm performance twice than the individual investors influence the performance. The results also reveal that the firm performance is positively associated with the firm size while negatively related with the financial leverage. Findings of the study are important for shareholders, managers, academicians and decision makers. They can use information to frame investors’ friendly policies and guide shareholders in taking right financial decisions.

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