The Effect of Ownership Structure on Corporate Financial Performance in the Czech Republic

The relationship between ownership structure and corporate performance is a matter of on-going attention among researchers. Although a lot has been published on this topic, this paper aims to provide additional evidence on the effects of such characteristics as ownership concentration, managerial ownership and foreign capital on the corporate financial performance. The findings are based on a representative sample of more than 400 corporations based in the Czech Republic with 50 employees or more from the manufacturing and construction industries. Their performance is evaluated using financial data from up to a 7-year long period, specifically return on assets and growth of assets, which are founded on Kaplan and Norton's (2004) theory of two incompatible ways of increasing financial performance. It is controlled for firm size, industry and legal form. Correlations, ANOVA and t-tests are employed to evaluate the size and shape of the relationships. Some of the results correspond to the findings of other authors in other countries (foreign investments) while some suggest that hypothesis proven elsewhere (effect of ownership concentration) might not be valid in the Czech Republic. Corporate governance and economic conditions in the Czech Republic are quite different from the conditions most researches of this topic carried out their research. Furthermore, not many researches in the Czech Republic have devoted their attention to this field recently. Therefore, this paper should constitute an additional contribution - prove or disprove findings based on data from other countries. In order to achieve the set goal, to verify the effect of ownership structure on corporate financial performance in the Czech Republic, the paper is structured as follows: the introduction and theoretical background provide support for the tested relationships, then the evaluation of financial performance is discussed, the data used are described, and finally the results are presented and discussed. Throughout the article, if appropriate, specifics of the Czech Republic are pointed out and used to explain different results than that can be found in available literature.