Investigating the Relationship between Managerial and Family Ownership and Firm Performance of the Companies Listed in Tehran Stock Exchange

Abstract

The aim of this paper is to examine relationship between managerial and family ownership structure on the firm performance. The sample consists of 93 companies listed on Tehran Stock Exchange for the year from 2004 to 2012. The study shows that equity ownerships in Iran are concentrated on few owners mainly by the State government, families or large corporations. Results reveal that managerial ownership relates significantly to return on assets (ROA) and return on equity (ROE) while family ownership relates significantly to Tobin's Q, ROA and ROE. Results suggest that an increase in the proportion of insider ownerships enhances the company performance due to re-alignment of internal and external interests and reduction in conflict of interests among shareholders. The results further indicate that the firm performance decreases when the managers’ share ownership increases. Managers with greater control and large shareholdings are more concerned with their own self-interests than the interests of the shareholders at large.