Nexus between Ownership Structures and Shareholders’ Wealth
International Journal of Multidisciplinary Research and Development, Volume: 2, Issue: 4, 226-231 April 2015
6 Pages Posted: 11 Apr 2015
Date Written: March 1, 2015
Every shareholder is independent and has same right as others yet theory says that, who and how a company is owned is a factor that influences the returns on a stock (clientele effect theory) This paper attempts to empirically test this theoretical relationship between the ownership structures of a firm and the wealth to shareholder. Using 125 observations from 2009 to 2013 accounting years from 25 purposive sampled companies, disclosed information on dividend stock prices, shareholding pattern was extracted from the annual reports for the analysis.
The univarite analysis indicates that, there are fluctuations in capital gains than dividend hence the shareholders returns variability is determine by capital gain. The average shareholders wealth was Rs. 239 with average dividend of Rs. 17.078 and capital gain of Rs. 221. Promoter holding account or an average of 51.43% of total holdings whiles foreign investors have average of 30.84% against institutional (both foreign and domestic) and Individuals (foreign and domestic) of 23.46% and 13.51%. There is no significant variation in promoter holdings across the companies as compared with other holdings for the period.
The correlation matrix indicates that promoter holdings negatively correlated with dividend, capital gain and total returns while foreign investors, institutional and public holding are positively related with all the shareholders variables.
The regression results reveals that promoters and institutional shareholders have inverse relationship while foreign and individual holdings have positive with no significant impact on shareholders’ wealth. On the other hand, foreign investors have positive and significant impact on capital gain at 5% level. Individual holdings also have positive impact on total returns and marginally significant at 10% level. It can be inferred that a company with much foreign and individuals investors have fluctuation in stock prices which may yield capital loss or gain.
The study therefore concludes that an increase in foreign investors whether institutional or individuals and the public have significant impact on the capital gains from the stock market and total returns as a whole. This is because; these investors drive stock prices through their active participation on the stock market.
Keywords: promoters, institutional investors, foreign investors, shareholders wealth
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