Ownership structure and performance of firms: Empirical evidence from an emerging market

Listed companies in a developing West African market are analyzed to determine how their ownership structure affects their financial results. Both market-based and accounting-based metrics have been used to assess company performance. Return on Equity and Return on Investment capture the financial reporting perspective, while the Marris Ratio and Tobin's Q represent market-based measures of companies' performance. As a surrogate for the actual ownership structure, the percentage of shares held by the Board of Directors has been used. Using Cluster analysis, the sample was split into three distinct categories. The Chi-square test for homogeneity shows that there are statistically significant differences between the groups. Companies with high levels of insider control on the Board of Directors tend to underperform those with a more diverse set of directors. The outcome is also supported by descriptive statistics. Firm performance is found to be inversely related to ownership structure. Consequently, we can confidently assert that a more autonomous and efficient board of directors boosts a company's productivity.