The Effect of Corporate Governance, Corporate Financing Decision and Ownership Structure on Firm Performance : A Panel Data Approach from Kuwait Stock Exchange

The aim of this paper is to examine the effect of corporate governance, corporate financing decision, and ownership structure on firm performance. The study uses panel based regression approach; the analysis is based on a sample of 80 listed Kuwait Stock Exchange Market firms, over a period of 9 years, from 2000 to 2008. Findings suggest that there is no association between ownership structure (identity, types or mix) and firm performance, using both measures of firm performance, ROA and Tobin's Q. This study also finds that government ownership is insignificantly positively related to ROA using pool data; the result for the panel sample documents a hump-shaped curve between government ownership and Tobin's Q. When institutional ownership is used, there is no nonlinearity related to the firm value, using both pool and panel data sample. In this study, we also apply a three-stage least square (3SLS) simultaneous equations model to study the interaction between capital structure, dividend policy, ownership structure and firm performance. We find that, to some extent, the types of shareholders influence firm value significantly. The only two ownership variables that negatively and significantly have an effect on firm value are government shareholding and individual shareholders. We also find evidence of its intermediate function, because both capital structure and dividend policy significantly and positively influence firm value. The results of simultaneous regressions also suggest that ownership structure impacts capital structure and dividend policy, which in turn affects firm value. We also show the endogeneity of capital structure and dividend policy in listed companies in Kuwait. Hence this study provides new lights on corporate governance, corporate financing decision, ownership structure and corporate structure issue on firms' performance