Investigating the relationship between ownership concentration, company performance and profit sharing policy in companies accepted in the food and pharmaceutical industries of Tehran Stock Exchange

Abstract:

In this study, the relationship between ownership concentration, company performance and dividend policy in companies listed in the food and pharmaceutical industries of the Tehran Stock Exchange has been investigated. The statistical sample of the research includes 44 companies during the period of 1380 to 1387. The chosen approach for hypothesis testing is using cross-sectional and temporal data. In this research, the integrated least squares regression method (panel data) is used. Ownership concentration is measured using the ownership percentage of major shareholders above 5%, performance using the criteria of return on assets ratio[1], return on equity ratio[2], Tobin's Q ratio[3] and profit sharing policy using the dividend ratio (dividend per share/earnings per share)[4]. The results show that at the 95% level, there is a significant relationship between ownership concentration and two performance measures, i.e. return on equity ratio, Tobin's Q ratio. There is. As ownership concentration interprets 2% of the changes in the return on equity ratio, and 2.4% of the changes in Tobin's Q ratio. That is, the greater the ownership concentration, the more control is exerted on the managers and the company's performance increases. Of course, this significant relationship does not apply between the ownership concentration and the performance evaluation criteria of the return on assets ratio. Also, a significant relationship was observed between the performance evaluation criteria and the dividend ratio, which was 12.9%, 21% and 21.9 percent of the changes in the dividend ratio are interpreted respectively by the performance evaluation criteria of the return on assets ratio, the return on equity ratio, and Tobin's Q ratio. This means that the improvement of performance can lead to an increase in the dividend. At the same time, a statistically significant relationship between the concentration of ownership (major shareholders) and the dividend policy has not been observed.

Key words:

Ownership concentration, Major shareholders, active companies, company performance, rate of return on assets, return on equity, Tobin's Q ratio, dividend payment ratio

1- Introduction:

The formation of a limited liability company and the opening of company ownership to the public had a significant impact on the way companies are run. The market system was organized in such a way that the company owners delegate the management of the company to the company managers. The separation of "ownership" from "management" led to the generality of the representation problem. In this issue, the conflict between maximizing the interests of employers and brokers is assumed. Solving the agency problem provides some assurance to the shareholders that the managers are trying to maximize their wealth. Sufficient supervision and care should be taken to ensure the accountability of economic enterprises to the public and interested persons. In agency relations, the goal of the owners is to maximize wealth, so in order to achieve this goal, they monitor the agent's work and evaluate his performance. In this case, the question is: Does the different ownership structure of companies have an effect on the performance and profit sharing policy? That is, if the owners of the company are formed by different groups, such as the government, financial institutions, banks and other companies, how will their profit sharing policy work? Is it more effective? By obtaining the answer to this question, more appropriate measures can be taken to improve the company's performance and profit sharing policy, and decision makers and investors will pay attention to the combination of company owners in order to achieve the optimal performance and profit sharing policy for the economic unit.    

Many economists believe that large companies are the most efficient, effective and economical types of economic enterprises. This is the reason why the attention of economists has been directed to the company, its field of activity and related issues.

A large group of financial economics theorizers look at the company from the angle of agency relationship. Agency relationship is a contract based on which the employer or owner appoints a representative or agent on his behalf and has the authority to make decisions.

In agency relations, the goal of the owners is to maximize wealth, so in order to achieve this goal, they monitor the agent's work and evaluate his performance.In this case, the question is: Does the different ownership structure of companies have an effect on performance and dividend policy? That is, if the owners of the company are formed by different groups, such as the government, financial institutions, banks, and other companies, how will their dividend policy function? And which of the different combinations of ownership is more effective in improving performance and dividend policy? By obtaining the answer to this question, more appropriate measures can be taken to improve the company's performance and profit sharing policy, and decision makers and investors will pay attention to the combination of company owners in order to achieve the optimal performance and profit sharing policy for the economic unit.      

In this chapter, after stating the research problem, we examine the history of the research subject and express the importance and necessity of the research, and also state the research objectives in the form of general and special objectives. The theoretical framework of the research, which was the main basis of the question and research topic, is given in this chapter, and the analytical model and hypotheses of the research are also mentioned. At the end of this chapter, the operational variables of the research and the definitions of words and terms will come. and consists of managers, the separation of ownership from management led to the generality of the "problem of agency". [5] Agency issues are also caused by the separation of ownership from control. The theory of agency assumes that there is a potential conflict between the interests of shareholders and management, and managers seek to obtain their maximum benefits from the company's shareholders, which may be in conflict with the interests of shareholders. According to the definition of Jensen and McLing [6], the representation relationship is an interaction between one or more shareholders or several shareholders with the owner or one or more representatives, the representative is responsible for performing a series of services on behalf of the shareholder, therefore determining the ownership structure and the composition of the company's shareholders, a control tool, and the exercise of governance in companies. This is after governance in the form of different dimensions that determine the type of ownership of the company, such as the distribution of ownership, the concentration of ownership, the presence of minority and major shareholders in the composition of the company's ownership and their ownership percentage.

The need for corporate governance is due to the conflict of interest that exists between the participants in the company. This conflict of interest is often related to the issue of agency. This conflict of interest, along with the impossibility of concluding an explicit and transparent contract between managers and shareholders, leads to insoluble issues regarding agency that affects the value of the company. The corporate governance system is designed to reduce agency costs by monitoring performance and limiting the opportunistic behavior of managers.

When the major shareholders have absolute control over the management of the company's affairs, which is itself a result of the concentration of ownership, the cost of representation and control is reduced, at the same time, the control and monitoring power of the shareholders is greatly reduced to the point where they will not have an effect on their own interests, therefore, considering the dominance of the ownership composition of the major shareholders in the structures of companies admitted to the stock exchange, the question arises whether the increase in the number of major shareholders and the exercise of absolute control by them will have a positive effect on the performance of the companies. Will it have or not? (Ahmedvand, 2015, p. 11) 3.

Ownership rights by managers and supervision by major shareholders are two ways that can potentially reduce agency problems and increase the value of the institution.

Basic ownership rights by managers align their interests with the interests of other shareholders, so that management is an incentive to pursue value-maximizing activities. The presence of major shareholders or shareholder institutions can also increase or improve the level of supervision. and therefore leads to better performance of the institution (Cannes et al., 2002, p. 58) [7]. Paying dividends may help to reduce agency costs and conflict of interest because cash dividends:

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If the necessary information about the manager's behavior or the state of the company is collected by one of the shareholders and that shareholder prevents the manager's opportunism, the benefits resulting from the manager's control It is realized for all shareholders, gathering information and monitoring the manager's behavior requires spending time and money. The smaller a shareholder's share of the company is, the benefits from monitoring the manager's behavior will be lower, so focusing on shares will lead to more monitoring of the manager's behavior and a reduction in opportunism.

The findings show that owner groups do not have the same form and degree of power and the same direction in influencing performance (Mazloumi, 2012, p. 16)3.