How Concentrated Ownership Affects the Growth of Firms in Pakistan?

Abstract

The growth of firms signals economic growlh. This study examines how concentrated ownership impacts the growth of firms. Empirical evidence is provided for 11 years (2006- 2016) from manufacturing sector of large scale firms listed on Pakistan Stock Exchange (PSE). System Generalised method of moments (GMM) estimation method is used to deal with the endogeneity of the ownership variable. TTic results display revealed that concentrated ownership significantly and positively impacts the growth of firms under both its measures of growlh: sales and assets. The results arc homologous with Edith Penrose’s theory of the growth of the firm and agency theory, supporting the alignment effect. Determinants of a firm's growth depicted varying behavior with sales growth and asset growth, revealing the diversity of the two measures. Study has practical implications for the investors and policy makers in understanding the role of concentrated ownership on the growth of firms.