Original Research Article DOI: 10.18231/2394-2770.2018.0023 Journal of Management Research and Analysis, April-June, 2018;5(2):146-153 146 Determinants of ownership pattern Daman Jeet 1,* , B.S. Bhatia 2 , R.K. Sharma 3 1 Research Scholar, 2,3 Professor, Sri Guru Granth Sahib World University, Fatehghar Sahib, Punjab, India *Corresponding Author: Email: damanjeetnitj@gmail.com Abstract Percentage of shares held is considered to be one of the primary measures of ownership structure as this ratio determines how a firm is owned and how the authority is distributed among owners. Studies have been conducted on interrelationships among corporate ownership and board structure characteristics and on the determinants and mechanism by which the ownership structure is formed. Broadly these studies only reflect on one or two governance characteristics with an exception by Agrawal and Knoeber, 1996. The inconclusive studies of ownership structure make it necessary to study the identity the determinants of ownership. Taking a proportionate sample of companies from the four major industries, this study tries to find the factors affecting ownership pattern. Captivating ownership as Indian and foreign promoters, financial performance measured using tobin’s q and duality (chairman and managing director being single person) positively and signifi cantly affect ownership. However, financial leverage negatively impacts ownership. Keywords: ROA-Return on Assets, Tobin’s Q, Corporate Governance. Introduction Ownership structure refers to the pattern of shareholdings of individuals or organizations in a company. Distribution of share ownership in terms of percentage held is considered to be one of the primary measures of ownership structure. It is measured as ratio of shares held by owner(s) to total number of company shares. This ratio determines how a firm is owned and how the authority is distributed among owners. Hence, it will provide basis to determine the concept of control and power in the company. Short (1994) squabbles that most of the previous studies empirically differentiate between owner controlled and management controlled firms are based upon percentage ownership criterion. Literature exploring the determinants of ownership pattern Berle and Means in 1932 brought up the issue that researchers have attempted to figure out ever since then, i.e. the determinants and mechanism by which the ownership structure is formed. Greater percentage of stocks owned by top managers gives them the right to take decisions that aid in maximizing shareholders’ wealth (Jensen & Meckling, 1976) as these choices will in turn maximize their own wealth. This way the ownership by managers aids in controlling agency problems. In addition, Fama, 1980 argues that the board of directors is the innermost internal control mechanism for monitoring managers. Three characteristics that influence the monitoring capability of a board are board size, board composition and board leadership structure (Jensen, 1993). The role of corporate ownership and the board of directors as governance mechanisms have been subject to considerable empirical analysis. There have also been studies conducted on interrelationships among corporate ownership and board structure characteristics especially the one by Y.T. Mak & Y. Li, (2001), determinants of corporate ownership and board structure. Another view is that ownership structure and board structure are endogenously determined. The costs and benefits of different ownership and board structures vary across firms. According to this view point, the corporate governance mechanisms of a particular firm imitate the tradeoffs between costs and benefits for that particular firm. Hence, apposite corporate governance mechanisms differ methodically across firms. Studies that have adopted this view include Demsetz and Lehn’s (1985), study of the structure of corporate ownership, and Hermalin and Weisbach’s (1988), study of board composition. However, broadly, these studies only reflect on one or two governance characteristics, such as the proportion of outside directors or corporate ownership. An exception is the recent study by Agrawal and Knoeber, 1996 which considers multiple monitoring mechanisms. Also, Ei Yet Chu & Kooi Guan Cheah (2004) in their study, the determinants of ownership structure considered the governance issues under four heads; 1. Information asymmetry in terms of firm size, firm age etc. 2. Agency conflicts in terms of leverage, dividend. 3. Risk 4. Performance using ROA, tobin’s q etc. But the research by Y.T. Mak & Y. Li, (2001) recognized the following antecedents of ownership pattern that included board composition as well: