NEXUS BETWEEN OWNERSHIP STRUCTURE AND FIRM PERFORMANCE - EVIDENCE FROM INDIAN SERVICE SECTOR

Shareholding pattern of an organization determines the management control and decision making climate. Empirical researches have proved relationship among the type of shareholdings, managerial efficiency and stock returns in manufacturing sectors. This study investigates the relationship between the organizational shareholding pattern and financial performance of select services sector companies taking sample from listed financial services and Information technology firms from CNX500 Index for a period of five years. The study emphasizes on the significance of categorical distinctions among ownership and evaluating its influence on firm performance for investment decisions. Both accounting and market based approach of Firm performance has been considered using Tobin Q ratio and Return on Capital Employed as proxy. The results show that there is Insider owner's dominance in services sector. A higher percentage of aggregate promoter and promoter's group holdings are documented in services sector. The study also documents a positive and significant relationship between the firm performance as measured by market model and the percentage of shares held by promoters and Institutional bodies. In contrast, there is negative and insignificant influence of promoter's holdings on the firm performance. However, Institutional shareholdings have a positive and significant influence. Dominant insider's ownership enhances management efficiency through excessive control for wealth maximization.