Ownership Structure and the Insolvency Risk: The Case of GCC Countries

Abstract

This study investigates the impact of the ownership structure on the insolvency risk by utilizing the multinomial logistic regression analysis on the sample of data collected from non-financial companies listed in the GCC countries' stock exchanges. The measure of the dependent variable, insolvency risk, is the Altman Z-Score. Using low insolvency risk as a reference category, this study tested the ownership variables in two groups: moderate insolvency risk and high insolvency risk. The overall findings of both groups were consistent with each other, showing that blockholders ownership has a significant positive impact on firms' insolvency risk, whereas institutional ownership and executive ownership have no significant impact on the insolvency risk. The results of this study could help companies in being more aware of the factors that could strengthen their ownership structure and in turn improve their corporate governance to take necessary precautions to stabilize their financial position, avoiding insolvency risks and contributing to the survival of the firm.