Ownership concentration impact on financial performance : evidence from Serbia

Vasilić, Nikola (2018) Ownership concentration impact on financial performance : evidence from Serbia. In: Fifth International Scientific Conference Contemporary Issues in Economics, Business and Management. Faculty of Economics, Kragujevac, pp. 111-120. ISBN 978-86-6091-082-2

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Abstract

Separation of ownership and management function in modern corporations resulted in the emergence of a conflict between principal (shareholders) and agent (top management). According to agency theory ownership concentration is a key mechanism that helps to mitigate principal-agent problem. As a result of the underdevelopment of the legal system and the corporate control market in transition economies and developing countries, the application of ownership concentration mechanism can lead to the emergence of a new conflict on the relationship between majority and minority shareholders. High ownership concentration allows the majority owner to use corporate resources in accordance with private goals, which negatively affects the value for minority shareholders and corporate performance. Accordingly, this research deals with the analysis of concentrated ownership impact on financial performance, measured by the Return on Asset (ROA) and Return on Equity (ROE). Empirical research was conducted for the period 2015-2017 on the sample of 70 non-financial companies, which shares are traded on the Belgrade Stock Exchange. The results of the applied statistical analysis methods show that ownership concentration greater than 55% has a negative impact on ROA and ROE.

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