The asymmetric impact of institutional ownership on firm performance: panel smooth transition regression model
ISSN: 1472-0701
Article publication date: 20 October 2020
Issue publication date: 16 November 2020
Abstract
Purpose
This study aims to test the asymmetric impact of institutional ownership on firm performance. This study does it through an examination of the hypotheses of efficient monitoring and convergence of interests from the Tehran Stock Exchange (TSE).
Design/methodology/approach
Using a panel smooth transition regression model, as a new econometric technique, this paper examined the data to explore the asymmetric impact of institutional ownership on firm performance. With regard to 177 firms for the period 2009 to 2018 from TSE. Performance proxies are returned on asset (ROA), return on equity (ROE) and Tobins’ Q.
Findings
The empirical for three performance proxies results strongly rejected the null hypothesis of linearity and the test for no remaining nonlinearity indicated a model with one transition function and one threshold parameters. The first regime (levels of institutional ownership below 28.5% and 43.5% for ROA and Tobins’ Q) showed that performance increases with institutional ownership while the trend was reversed in the second regime (levels of institutional ownership above 28.5% and 43.5% for ROA and Tobins’ Q percent). Also, institutional shareholders percent between 4.2 and 14.1 explain the positive relationship between institutional shareholders and ROE.
Originality/value
Furthermore, the findings of this study suggest that the application of institutional ownership theories calls for more inquiry.
Keywords
Acknowledgements
The authors thank anonymous reviewers for insightful comments that greatly improved the manuscript.
Citation
Daryaei, A.A. and Fattahi, Y. (2020), "The asymmetric impact of institutional ownership on firm performance: panel smooth transition regression model", Corporate Governance, Vol. 20 No. 7, pp. 1191-1203. https://doi.org/10.1108/CG-06-2020-0254
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited