The effect of post IPO ownership concentration on firm performance

This study investigated the relationship between ownership concentration measured as the Herfindahl Index and cumulative ownership held by the five largest owners and long term firm performance measured in ROA and market to book ratio while controlling for year, industry, total assets and board size. In the sample of 126 Chinese companies that had their IPO on the Shenzhen stock exchange during 2010 conflicting results were found during the period from 2010 until 2013. A statistically insignificant positive relationship was found between market to book ratio and the ownership concentration measures while ROA showed a weak negative and significant relationship with one ownership concentration measure. These results follow previous research that was unable to find a clear relationship between ownership concentration and firm performance. Possible reasons for the conflicting results were identified including suggestions for future research.