Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Review of Middle East Economics and Finance

Ed. by Dibeh, Ghassan / Assaf, Ata / Cobham, David / Hakimian, Hassan / Henry, Clement M.

See all formats and pricing
More options …

The Impact of Ownership on Corporate Performance: The Case of the UAE

Magda Elsayed Kandil / Minko Markovski
Published Online: 2018-01-19 | DOI: https://doi.org/10.1515/rmeef-2017-0013


This study attempts to identify whether government ownership has an effect on corporate performance, such as Return on Assets (ROA), Price to Book value, and Profits for a sample of 102 listed companies on the UAE stock exchanges and a subsample of 17 banks listed on the same bourses over a period of 31 quarters. In the case of the sample of 102 companies, government ownership has a positive impact on some of the corporate performance indicators, as well in the banking subsample. In addition, the analysis evaluates the impact of state ownership on debt accumulated across the two samples. The results indicate that state ownership reduced the need to accumulate debt in general across the larger sample. However, focusing on banks, state ownership facilitates borrowing and accumulating debt. The results point to the positive effect of state ownership on corporate performance. Further, state ownership eases constraints on banks’ borrowing as it boosts confidence in the outlook, facilitating higher ratings and cheaper sources of funding. In the case of the UAE, similar to some other countries, where there is a strong trend toward government ownership in listed companies and banks, it has a positive effect on their performance for the period 2008–2016, i. e., there is a positive relationship between the block-holder ownership and firms’ performance, subject to efficiency control measures.

Keywords: state ownership; firm performance; United Arab Emirates; emerging markets

JEL Classification: G30; G32; G39


  • Alfaraih, M., F. Alanezi, and H. Almujamed. 2012. “The Influence of Institutional and Government Ownership on Firm Performance: Evidence from Kuwait.” International Business Research 5 (10):192–200.Google Scholar

  • Andres, C. 2008. “Large Shareholders and Firm performance—An Empirical Examination of Founding-Family Ownership.” Journal of Corporate Finance 14 (4):431–445.CrossrefWeb of ScienceGoogle Scholar

  • Ang, J.S., R.A. Cole, and J.W. Lin. 2000. “Agency Costs and Ownership Structure.” The Journal of Finance 55 (1):81–106.CrossrefGoogle Scholar

  • Benson, B.W., and W.N. Davidson, III. 2009. “Reexamining the Managerial Ownership Effect on Firm Value.” Journal of Corporate Finance 15 (5):573–586.CrossrefWeb of ScienceGoogle Scholar

  • Berger, P.G., and E. Ofek. 1995. “Diversification’s Effect on Firm Value.” Journal of Financial Economics 37 (1):39–65.CrossrefGoogle Scholar

  • Borisova, G., P. Brockman, J.M. Salas, and A. Zagorchev. 2012. “Government Ownership and Corporate Governance: Evidence from the EU.” Journal of Banking & Finance 36 (11):2917–2934.CrossrefWeb of ScienceGoogle Scholar

  • Chen, -S.-S., and K.W. Ho. 2000. “Corporate Diversification, Ownership Structure, and Firm Value: The Singapore Evidence.” International Review of Financial Analysis 9 (3):315–326.CrossrefGoogle Scholar

  • Cho, M.-H. 1998. “Ownership Structure, Investment, and the Corporate Value: An Empirical Analysis.” Journal of Financial Economics 47 (1):103–121.CrossrefGoogle Scholar

  • Claessens, S., and S. Djankov. 1999. “Ownership Concentration and Corporate Performance in the Czech Republic.” Journal of Comparative Economics 27 (3):498–513.CrossrefGoogle Scholar

  • Claessens, S., S. Djankov, P.H.F. Joseph, and L.H.P. Lang. 1999. Corporate Diversification in East Asia: The Role of Ultimate Ownership and Group Affiliation. Washington, DC: The World Bank.Google Scholar

  • Coles, J.L., M.L. Lemmon, and J. Felix Meschke. 2012. “Structural Models and Endogeneity in Corporate Finance: The Link between Managerial Ownership and Corporate Performance.” Journal of Financial Economics 103 (1):149–168.CrossrefWeb of ScienceGoogle Scholar

  • Dharwadkar, R., G. George, and P. Brandes. 2000. “Privatization in Emerging Economies: An Agency Theory Perspective.” The Academy of Management Review 25 (3):650–669.Google Scholar

  • Douma, S., R. George, and R. Kabir. 2006. “Foreign and Domestic Ownership, Business Groups, and Firm Performance: Evidence from a Large Emerging Market.” Strategic Management Journal 27 (7):637–657.CrossrefGoogle Scholar

  • Jensen, M.C., and W.H. Meckling. 1976. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics 3 (4):305–360.CrossrefGoogle Scholar

  • Kang, Y.-S., and B.-Y. Kim 2012. “Ownership Structure and Firm Performance: Evidence from the Chinese Corporate Reform.” China Economic Review (1043951X) 23 (2):471.CrossrefGoogle Scholar

  • Kim, B. 2011. “Do Foreign Investors Encourage Value-Enhancing Corporate Risk Taking?.” Emerging Markets Finance & Trade 47 (3):88–110.CrossrefWeb of ScienceGoogle Scholar

  • Konijn, S.J.J., R. Kräussl, and A. Lucas. 2011. “Blockholder Dispersion and Firm Value.” Journal of Corporate Finance 17 (5):1330–1339.Web of ScienceCrossrefGoogle Scholar

  • Lemmon, M.L., and K.V. Lins. 2003. “Ownership Structure, Corporate Governance, and Firm Value: Evidence from the East Asian Financial Crisis.” The Journal of Finance 58 (4):1445–1468.CrossrefGoogle Scholar

  • Lin, J., F. Cai, and Z. Li. 1998. “Competition, Policy Burdens, and State–Owned Enterprise Reform.” The American Economic Review 88 (2):422–427. Papers and Proceedings of the Hundred and Tenth Annual Meeting of the American Economic Association, May.Google Scholar

  • Thomsen, S., and T. Pedersen. 2000. “Ownership Structure and Economic Performance in the Largest European Companies.” Strategic Management Journal 21 (6):689–705.CrossrefGoogle Scholar

  • Thomsen, S., T. Pedersen, and H.K. Kvist. 2006. “Blockholder Ownership: Effects on Firm Value in Market and Control Based Governance Systems.” Journal of Corporate Finance 12 (2):246–269.CrossrefGoogle Scholar

  • Tian, L., and Estrin, S. 2008. “Retained State Shareholding in Chinese PLCs: Does Government Ownership Always Reduce Cigarette Value?” Journal of Comparative Economics 36 (2008):74–89.CrossrefGoogle Scholar

About the article

The views expressed in this paper are those of the authors and should not be interpreted as those of the Central Bank of the United Arab Emirates.

Published Online: 2018-01-19

Citation Information: Review of Middle East Economics and Finance, Volume 13, Issue 3, 20170013, ISSN (Online) 1475-3693, DOI: https://doi.org/10.1515/rmeef-2017-0013.

Export Citation

© 2018 Walter de Gruyter GmbH, Berlin/Boston.Get Permission

Comments (0)

Please log in or register to comment.
Log in