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

Magda Elsayed Kandil 1  and Minko Markovski 2
  • 1 Research and Statistics Department, Abu Dhabi, United Arab Emirates
  • 2 Central Bank of the UAE, Abu Dhabi, United Arab Emirates
Magda Elsayed Kandil
  • Corresponding author
  • Research and Statistics Department, Central Bank of the UAE, Abu Dhabi, United Arab Emirates
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and Minko Markovski

Abstract

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.

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The Review of Middle East Economics and Finance (RMEEF) addresses applied original research in the fields of economics and finance pertaining to the MENA region (Middle East and North Africa), including Turkey and Iran. The journal also publishes articles that deal with the economies of neighboring countries and/or the relationship and interactions between those economies and the MENA region.

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