In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 5, May, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
571
The Rela ionship be ween Ins i u ional
Owne ship wi h he Cu en Financial
Pe o mance o he Fi ms Lis ed in Bombay
S ock Exchange
Na ges Mohseni Dehkalani
M.S. S uden and Membe o Young Resea che s and Eli es, Islamshah
B anch, Islamic Azad Uni e si y, Islamshah , I an
Asgha Asadi1
Assis an P o esso , Fi oozkouh B anch, Islamic Azad Uni e si y, Fi oozkouh,
I an
Hamid Reza Ko dlouie
Assis an P o esso , Eslamshah B anch, Islamic Azad Uni e si y,
Islamshah , I an
Abs ac
In economically de eloped coun ies, nume ous s udies ha e been
conduc ed on he e ec o ins i u ional owne ship on i m pe o mance.
Because o he impo ance o his esea ch subjec , we plan o examine he
ins i u ional owne ship in Bombay S ock Exchange in e ms o he cu en
pe o mance du ing 2009 o 2013. Based on he examined a iables, he da a
panel eg ession in so wa e E iews was used. The esul s showed ha
ins i u ional owne ship has no signi ican ela ionship wi h cu en pe o mance
o Bombay S ock Exchange Companies.
Keywo ds: Ins i u ional owne ship, cu en pe o mance, Bombay S ock
Exchange (BSE)
Ci e his a icle: Dehkalani, N. M., Asadi, A., & Ko dlouie, H. R. (2015). The Rela ionship
be ween Ins i u ional Owne ship wi h he Cu en Financial Pe o mance o he Fi ms Lis ed in
Bombay S ock Exchange. In e na ional Jou nal o Managemen , Accoun ing and Economics,
2(6), 571-583.
1 Co esponding au ho ’s email: Asgha [email protected]
In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 5, May, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
572
In oduc ion
Rep esen a i e P oblems appea ed when he manage s, namely hose ha unde ook
he esponsibili y o esou ces alloca ion o he companies as ep esen a i e o
sha eholde s, ook ac ions ha educing he in e es s o he sha eholde s; hey only
wan ed o achie e hei own in e es s. Due o misalignmen in e es s o sha eholde s and
manage s and in o ma ional asymme y, he in es o s we e always on he sea ch o he
c i e ia ha measu ed ac ual pe o mance o manage as well as he mechanism ha led
o i s imp o emen . In he pas , economis s assumed ha all g oups in a co po a ion had
a common goal o ope a e bu o e he pas 3 decades, lo s o cases abou his ha he e
is con lic o in e es s be ween he g oups and how he companies ace hese issues,
ha e been deba ed by economis s. Today, wha mos a ac s ou a en ion is he
inc easing p esence o legal and ins i u ional in es o s, on he ci cle o owne s o LLP
companies and i is an impac ha he ac i e pa icipa ion o his g oup can ha e on he
go e nance and p oduc ion on he o ganiza ions as well as hei pe o mance.
The main objec i e o his s udy was o in es iga e he ela ionship be ween
ins i u ional owne ship on he cu en pe o mance o he companies lis ed in Bombay
S ock Exchange.
Theo e ical and li e a u e
Ins i u ional owne ship heo ies
In gene al, abou he ela ionship and in luence o ins i u ional sha eholde s
owne ship wi h pe o mance and alue o he company, he e a e a ious heo ies, some
o which a e as ollows:
E icien Moni o ing Hypo hesis
Ins i u ional in es o s and majo sha eholde s ha a e ou o he company compa ed
o he mino sha eholde s, because o acili ies, expe ise and high expe ience can
moni o pe o mance a lowe cos , so we can expec a posi i e ela ionship be ween he
ins i u ional owne ship and company pe o mance.
S a egic Alignmen Hypo hesis
Some imes manage s and ins i u ional in es o s' expec a ions a e ied o he in e es s
o he g oup manage s and by accommoda ing he in e es s o hese wo g oups, he
sha eholde s' in e es s a e igno ed. In such a case, he expec ed bene icial e ec s o
exe cising e ec i e o e sigh by he majo sha eholde s on manage s would be educed
ha in his case, in ac , we see a con lic o in e es be ween majo sha eholde s and
o he owne s ha due o he in luence o majo sha eholde s, he con lic will be
ul ima ely a he expense o o he sha eholde s.
The ole o ins i u ional in es o s on co po a e pe o mance
Ins i u ional in es o s, due o ha ing a signi ican numbe o sha es o he companies
as well as being p o essional on in es men ha e he abili y and incen i e o in es and
In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 5, May, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
573
also he abili y and incen i e o moni o he companies. Gene ally, i is belie ed ha he
p esence o ins i u ional in es o s may lead o changes in beha io and i m
pe o mance. This is o igina ed om egula o y ac i i ies o such sha eholde s.
Resea che s in his ield a gue ha o e see he company pe o mance ia da a collec ion
and p icing managemen decisions implici ly, and h ough he adminis a ion o
co po a e p ac ice (Nou a esh e al, 2009).
The ole o ins i u ional in es o s has been expanded, while inc easing he size o
i ms and inancial in e media ies and g ow h o ins i u ional in es o s as well as
mo emen o capi al om he ac ual sec o o inancial ins i u ions. Inc eased
moni o ing mechanisms ou side he company, adds he company ule o ins i u ional
in es o s as owne s. Ins i u ional in es o s di ec ly o indi ec ly ha e an e ec i e
in luence on he ac i i ies o manage s; hei in luence is h ough hei own ac ions as
well as s ock ading. This in luence can be e y s ong, so ha he ope a ion will lead
o a speci ic di ec ion. (Rahnamaye Rudposh i, 2006)
Bombay S ock Exchange
Bombay S ock Exchange in Ma a hi is he S ock Exchange o India,
which i s headqua e s is loca ed a Dalal S ee , Mumbai, in Maha ash a s a e, India. I
is he oldes s ock exchange in Asia. In Decembe 2011, he alue o he ma ke o
sha eholde s o he companies lis ed on he Bombay S ock Exchange was es ima ed
o e $ 1 illion dolla s, ha acco dingly, i was known as he six h la ges s ock ma ke
in Asia. Also, i was anked 14 h on he lis o he la ges ma ke s in he wo ld.
Acco ding o he s a is ics p esen ed in Ma ch 2012, he Bombay S ock Exchange
places o e 5.133 companies on i s lis ha om his poin o iew has he la ges
numbe o lis ed companies, among all he wo ld's s ock ma ke s. BSE is he oldes
exchange in Asia o 133 yea s old. I was ounded as he Socie y o na i e s ock b oke s
a he beginning in 1875. BSE is he i s s ock ma ke in India ha ecei ed i s
con i ma ion om he go e nmen in 1956 unde Limi ed Con ac s. The sys em o his
exchange has been changed in o elec onic online s a e in 1995. (Repo Bahadu isi ed
he Bombay S ock Exchange)
Companies ha a e placed in G oup A o BSE ha a e he mos ac i e companies in
he Bombay s ock exchange ha ing he highes amoun o capi al, hei ansac ions a e
widesp ead, hei s ocks a e egula ly bough and sold, a e always p o i able and s ock
index in all o hem is SENSEX. The companies o his g oup mus mee all condi ions
o exposu e in g oup A.
Pas esea ches
Hosseini e al (2012) in es iga ed he e ec o company unc ion and ins i u ional
owne ship on in ellec ual capi al o i ms lis ed in Teh an S ock Exchange be ween 73
companies in 81 o 89 and i indica es ha he company's unc ion has a posi i e and
signi ican co ela ion wi h in ellec ual capi al, bu no signi ican ela ionship be ween
an ins i u ional owne ship and in ellec ual capi al was shown.
In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 5, May, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
574
Rahimi (2011) s udied he impac o he pe cen o non-bound boa d o ins i u ional
owne ship on he social esponsibili y o he companies lis ed in Teh an S ock
Exchange. In his s udy, samples we e collec ed om 56 companies in he yea s o 81-
88 and h ough Sepengapkdy e al (2007)’ ques ionnai es concluding ha he e is no
ela ion be ween pe cen age o non-bound boa d and ins i u ional owne ship on
co po a e social esponsibili y. Nikbakh and Rahmani-nia (2010) in hei s udy
examined he e ec o ins i u ional owne ship on he pe o mance o i ms lis ed in
Teh an S ock Exchange. The da a needed was o he inancial s a emen s o 78 s ock
companies om 81 o 86 and he esul s o he s udy showed a posi i e and signi ican
ela ionship be ween ins i u ional owne ship and pe o mance.
By a esea ch in 2011 in Spain i was concluded ha only owne ship concen a ion
has a signi ican impac , wi h he calcula ed Tobin's Q, as he measu e o alua ing he
company's alue.
The esul s o Ma -No , F., & Sulong, Z. (2010).’ esea ch o e 403 companies o
s ock exchange o Malaysia showed a signi ican posi i e ela ion be ween ins i u ional
owne ship o he company. Tsaia H., Z. Gu(2007) s udied he ela ionship be ween
ins i u ional owne ship and i m pe o mance o he pe iod 1999 o 2003. In his s udy,
ins i u ional owne ship was conside ed agains he pe cen age o sha es held by s a e-
owned companies o he whole o he capi al. Companies in his esea ch include
insu ance companies, inancial ins i u ions, banks, go e nmen agencies, and o he
componen s o he go e nmen . They showed ha ins i u ional in es o s may help
in es o s educe agency p oblems esul ing om he sepa a ion o managemen and
owne ship.
Namazi and Ke mani (2007) s udied he e ec o owne ship s uc u e on i m
pe o mance using a sample o 66 specimens o companies lis ed on he s ock exchange.
The esul s o he s udy done by use o a combined eg ession, sugges ed ha he e is a
posi i e ela ionship be ween co po a e owne ship and pe o mance, while he
ela ionship be ween ins i u ional owne ship (s a e owne ship) and managemen
owne ship was nega i e. In his esea ch, he c i e ia such as ROA, ROE, Tobin's Q and
he MBVR we e used o e alua e he pe o mance.
Chioun, Jeng-Ren, Lin,& Yi-Hua,.(2005) compa ed he owne ship s uc u e o
Chinese and Taiwanese companies and examined ha whe he he pe o mance o hese
companies is in luenced by hei owne ship s uc u e. The esul s showed ha : 1. he
s a e owne ship and concen a ion o owne ship in Chinese companies a e mo e han
Taiwanese companies. Meanwhile, sha es in he hands o p i a e en e p ises in China
a e less han Taiwan; 2. The ope a ional pe o mance o Chinese companies has in e se
ela ion wi h s a e owne ship concen a ion and has a di ec ela ionship wi h he
concen a ion o p i a e p ope y (ins i u ions); 3. The e is a s aigh o wa d ela ionship
be ween owne ship concen a ion and i m pe o mance in Taiwan.
Ranjba (2005) s udied he e ec o owne ship ype on he company pe o mance
(P i a iza ion expe iences in I an). he used inancial in o ma ion o 18 companies (8
companies ha e been ans e ed o he p i a e sec o and 10 assigned o semi-public
sec o ) ha we e assigned in 1991 o 2000 and s udied he pe o mance ela ed o 3
In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 5, May, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
575
yea s be o e and a e assignmen o he companies o he wo g oups. The esul s
showed ha al hough he pe o mance has go en be e a e assignmen bu s a is ically
he e is no ela ion be ween he pe o mance be o e and a e assignmen . Also, he e is
no signi ican ela ion be ween he unc ion o he companies assigned o he public and
p i a e sec o s in he pe iod a e he assignmen
Peng e al. (2003) in he s udy en i led "The ela ionship be ween boa d composi ion
and i m pe o mance" examined he ela ion be ween p esence o he o he membe s o
he boa d wi h no esponsibili y and company unc ion in Russian companies. In hei
s udy, hey used he a e o non-bounded manage s as he c i e ia o composi ion o he
boa d and he a io o ROE as a benchma k o measu e pe o mance. Thei esea ch
esul s indica ed ha he The e is no signi ican ela ion be ween he a io o he non-
bound manage s o boa d and ROE.
Holde ness (1988) examined he s udies ha had es ed he e ec s o owne ship o
inside s in USA and ins i u ional in es o s on he decisions o he company and he
company alue. Con lic ing esul s was ob ained abou he e ec s o a ious
in es iga ions. Inside s' owne ship in he company can align he in e es s o he inside s
wi h he sha eholde s, hus leading o be e decisions o he highe alue o he
company. Howe e , owne ship o he mos inside s may esul in a highe deg ee o
managemen con ol, which po en ially pu s adminis a o s in he ench. En enching o
manage s also means ha hey e-buy a numbe o sha es, so hey can be e ec i e in
decision making. Simila ly, mo e con ol o ins i u ional in es o s would cause hei
ac ions, which inc eases he company's s ock ma ke alue and all s akeholde s would
ake bene i . Howe e , such con ol may be o p i a e in e es s o ins i u ional
in es o s, i means ha he bene i s ha he o he sha eholde s will no ha e. Usually
his ype o in e es educes he alue o he company.
Resea ch Hypo heses
The esea ch hypo heses a e exp essed as ollows:
H1: The e is a signi ican ela ionship be ween ins i u ional owne ship and he cu en
unc ion o he companies lis ed on Bombay S ock Exchange.
H1a: The e is a signi ican ela ionship be ween ins i u ional owne ship a io o he
companies lis ed on Bombay S ock Exchange and ROE.
H1b: The e is a signi ican ela ionship be ween ins i u ional owne ship a io o he
companies lis ed on Bombay S ock Exchange and he in e es o each sha e
Me hodology
Va iables
Dependen a iables
Cu en and u u e inancial pe o mance
In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 5, May, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
576
Re u n on equi y
I is one o he pe o mance e alua ion accoun ing c i e ia ha is ob ained ou o
di iding he ne p o i o he owne s o o dina y sha es by sha eholde s’ equi y,
common s ocks (o i s a e age). This a io indica es he e u n o cash unds in es ed o
he company's common s ock owne s and indica es he abili y o he i m's managemen
on use o hese unds. A i m ha has a ela i ely high e u n on equi y, in essence, has
he abili y o gene a e cash (Roos, G., Roos, J. (1997). Re u n on equi y a io was used
o assess he unc ion.
Ea nings pe sha e
Ano he indica o o pe o mance e alua ion o he company is ea nings pe sha e.
The speci ied index is calcula ed and epo ed in he inancial s a emen s. This index is
he mos widely used measu es o pe o mance o all in es o s due o i s simplici y in
unde s anding which is calcula ed by di iding he ne p o i o he company by he
numbe o issued sha es.
Independen Va iables
Pe cen age and quan i y o ins i u ional owne ship
In his s udy, "ins i u ion owne ship" is aken as he independen a iable ha i s
indices include:
Pe cen age o ins i u ional owne ship and quan i y o he ins i u ional owne s
These a iables a e conside ed based on a e iew o he li e a u e ela ed o co po a e
go e nance and a e used as he ins i u ional owne ship in he esea ches o Co ne e al
(2007), Hasas Yeganeh e al (2008) and Namazi e al (2007).
Con ol a iables
Deb o le e age a io
Resea che s, o measu e he le e age, use he a ious c i e ia, such as inancial
le e age, deb a io, he o al o deb s modi ied by ma ke alue o equi y and o he s. In
his s udy, he a io o o al deb di ided by o al asse s used in inancial le e age = o al
liabili ies / o al asse s
Company Size
In o de o calcula e he a iable o company size we used he c i e ia such as
Loga i hm o he ma ke alue o equi y, log o company asse s, and log o sales and so
on. A his esea ch we used he loga i hm o he o al asse s o he company o measu e
his a iable.
In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 5, May, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
577
Popula ion and sample
Resea ch popula ion includes indus ies o cemen , pha maceu icals, chemicals, oil,
Ca and essen ial me als. They should no be o he in es men companies and banks
and inancial in e media e, due o he special na u e o hei ac i i ies. They should ha e
pa icipa ed in Bombay S ock exchange du ing 2009 o 2013 wi h no inancial yea
change. They should ha e had a con inuous ac i i y and hey should ha e been
p o i able.
The sample size consis s o 38 companies ou o 58. In his s udy, we only used he
sys ema ic omission me hod o selec he sample wi h espec o he condi ions
conside ed by he esea che .
Da a analysis
Da a analysis and es ing hypo heses o his esea ch we e done by Excel and E iews
so wa es. Thus, he in o ma ion p o ided by he da abases was so ed ou and
ca ego ized in Excel and hen communica ed o E iews so wa e so ha he ele an
s a is ical es s pe o med on hem. In his esea ch, o es hypo heses and examine he
alidi y o he eg ession o al alue and he jus i ica ion powe o eg ession , F
s a is ics and coe icien o de e mina ion (R2) we e used. The me hod o combined da a
( ime-se ies and c oss-sec ional da a) we e used o es ima e he model. Fo s a is ical
es , he so wa e E- iews, and used Excel we e used.
Desc ip i e analysis
Unde s anding he esea ch s a is ical popula ion, i is equi ed o desc ibe he
esea ch da a o iden i y a dominan model o ela ionships among a iables.
Table 1. Va iables desc ip i e s a is ics
P ob
.
o
S a is ics
qua ile B a
S a is ics
qua ile
B a
Elonga ion Skewness SD Min. Max. Mean A e age Va iables
0.00 253.63 7.43 1.76 30.45 0.58 199.09 19.66 31.05 EPS
0.00 35.88 3.03 -1.06 21.61 18.08 99.84 79.11 74.09
Ins i u ional
owne ship
0.00 29055.81 62.08 6.70 3785.45 350.00 41448.00 1915.50 2615.46
numbe o
Ins i u ional
owne ship
0.11 4.37 2.41 0.23 0.21 0.00 1.00 0.31 0.30 Le e age
0.00 263073.20 183.30 13.42 163.87 -0.92 2259.96 10.90 27.30 ROE
0.10 4.55 2.52 0.32 1.31 22.57 28.48 25.01 25.14 Size
Acco ding o Table 1 and compa ing o he desc ip i e s a is ics ela ed o he
Bombay, i can be ound ha an a e age o pe cen age o owne ship o ins i u ional
in es o s in Mumbai is 74.09 indica ing he mo e owne ship o ins i u ional in es o s in
Mumbai. Also, he a e age inancial le e age o he i ms lis ed in Bombay S ock
Exchange is equal o 0.30 showing ha companies use deb s mo e o inance hei
ac i i ies and hey a e dependen on hei capi al s uc u e. The p obabili y s a is ics o
In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 5, May, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
578
he qua ile B a show ha he s udy a iables ha e mos ly a signi icance le el o less
han 0.05% which ep esen s he non-no mali y o he da a a iables. Howe e ,
acco ding o he cen al limi he da a mo e han 30 ends o be no mal. Based on
heo em o he o al cen al limi and a e age alues, a andom sample o n numbe was
selec ed ha app oxima ely ends o ha e a symme ical dis ibu ion o he sample.
In e en ial Analysis
Tes ing esea ch hypo heses, panel da a eg ession es we e used. Since he da a
used in his s udy a e panel hey need pa icula s eps o be analyzed. Gene ally, model
es ima ion by panel da a in ol es he ollowing s eps:
Reliabili y analysis
Model p edic abili y by panel da a
De e mina ion o ixed o andom e ec s
Pa ame e s es ima ion
Reliabili y o he a iables
In es iga ing he eliabili y o a iables, i is possible o use es s such as ADF, PP16,
ISP15 and LLC14. Dickey Fulle Tes (ADF) is one o he mos impo an uni oo es
which has been applied in his s udy. The eliabili y o a iables has been shown in able
2.
Table 2 ADF o e alua ing he eliabili y o he a iables
P obabili y s a is ics
S a is ics
Va iable
0 142.158 EPS 0 154.932 Ins i u ional owne ship pe cen
0.015 104.893 numbe o Ins i u ional owne ship
0 136.068 Le e age 0.006 110.119 ROE
0.006 100.835 Size
I he p obabili y o is less han 0.05 o Dickey Fulle es , we con i m he
eliabili y o he a iable o he wise he a iable is no alid and Dickey-Fulle es wi h
a phase o di e ence measu emen mus be execu ed again. Table 2 shows ha o some
a iables, s a is ics p obabili y is less han 0.05 and o some o a iables is g ea e han
0.05. P epa ing o he a iables, o pe o m es s o Lime F and Hausman es , o he
da a o da a panel, he a iables mus be eliable. The e o e Dickey Fulle es is done
on a iables ha a e o s a is ics p obabili y mo e han 0.05. We also conduc ed a phase
di e ence measu emen ha he ou pu s a e shown acco ding o Table 3 ha he esul s
o Dickey-Fulle es is pe o med on he da a wi h a phase o di e ence measu emen ,
ha he ou pu s s a is ics imply less han 5% which indica es he eliabili y o all he
a iables, he e o e he condi ions o implemen ing he nex es s o chose a good
model o he eg ession model is sa is ied.
In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 5, May, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
579
F es (Chow) o selec ing In e cep o Cons an a iables
Fi s ly, i is equi ed o es he common ixed alue which is homogenei y o
di e en imes o s udy. Tes ing his hypo hesis, F es is used. The esul o his es has
been shown in able 3. The hypo heses a e also p esen ed as ollows:
Hypo hesis H0: in e cep s o he model a e equal o each o he = combined da a
model
Hypo hesis H1: in e cep s o he model a y om sample o sample = ixed e ec s
model
Table 3 F es (Chow) o selec ing In e cep o Cons an a iables
e ec
P obabili y
s a is ics
S a is ics Resea ch hypo heses
The combined da a model is
con i med
0.733 0.834 Seconda y hypo hesis (1)
The cons an e ec s model is
con i med
0.00 7.414 Seconda y hypo hesis (2)
I he s a is ic p obabili y is less han 0.05 he cons an e ec s model is con i med
o he wise he combined da a model is con i med. Table 3 shows ha in he i s
seconda y hypo hesis he combined da a and in he second seconda y hypo hesis
cons an e ec s models a e con i med. Now, o examine o selec he ixed e ec s
model es agains andom e ec s model, we need he Husman es
I he Hausman es s a is ics p obabili y is less han 0.05, he ixed e ec s model is
accep ed, bu i he p obabili y is g ea e han 0.05 hen he e is su icien eason o
ejec he ixed e ec s model and o es ela ed hypo heses he andom e ec s model is
used. Acco ding o able 4, he andom e ec s model needs o be applied since he
p obabili y is la ge han 0.05.
Table 4: Hassman es o selec ing he cons an and andom e ec pa e ns
Resea ch hypo heses Tes Type s a is ics F eedom
deg ee P obabili y
s a is ics
Seconda y hypo hesis (2) χ
2
5.928 4 0.204
Es ima ion o coe icien s o he esea ch hypo heses
A e eliabili y es s and F Lime es , we should es ima e he coe icien s o
hypo heses models o 1 and 2 o which mul iple eg ession es s we e used.
