OWNERSHIP CONCENTRATION AND FIRM PERFORMANCE: MODERATING ROLE OF GROUP AFFILIATION IN PAKISTAN

The present study investigates the comparative performance effects of ownership concentration for group affiliated firms relative to standalone firms in Pakistan. The study employs treatment effects regression model to address the endogeneity problems and reverse causality. The findings indicate that effect of ownership concentration is positive on firm performance. However, the comparative analyses results show that relationship remains positive for standalone firms whereas it turns into negative for group firms. The positive relationship support to the argument that ownership concentration strengthen the internal monitoring of the firm and it serves as a substitute of weak external governance system in the emerging countries. The negative relationship is consistent with the entrenchment effect. The study sheds light on an important governance issue and stresses the need for strengthening the external governance mechanism in the country