Investigating the effect of ownership concentration on company growth considering the role of industry growth in the Iranian capital market

Objective: The main objective of this study is to investigate the effect of ownership concentration on the growth of companies listed on the Tehran Stock Exchange and analyze the moderating role of industry growth in this regard. Theoretical literature in the field of corporate governance shows that ownership concentration which typically leads to the dominance of major shareholders over management decisions can limit entrepreneurial behaviors and reduce innovation incentives. Also, the powerful presence of major shareholders may lead to opportunistic behaviors and restrictive controls that ultimately affect company growth. However, it is expected that external conditions, including the level of industry growth, can reduce the intensity of these effects or modify their direction.
Methods: This study is an applied study based on panel data analysis. To conduct the research, financial and economic data related to companies listed on the Tehran Stock Exchange were collected over a nine-year period from 2015 to 2023 for 105 companies using a screening method. Using multivariate regression models, the effect of ownership concentration on company growth was measured. Also, to examine the moderating role of industry growth, the industry growth variable was entered into the model as an interaction variable. In order to control the effects of heterogeneity of cross-sectional units and data dynamics, appropriate diagnostic tests and estimation methods compatible with panel data were used.
Results: The results of the first hypothesis test showed that ownership concentration has a negative and significant effect on the growth of the company. In other words, the higher the degree of ownership concentration that is, the greater the percentage of shares held by one or more major shareholders the greater the likelihood of a company’s growth being reduced. This result suggests that major shareholders may tend to limit risky and innovative investments, which ultimately leads to a decrease in the growth rate. Further, the second hypothesis suggests that industry growth as a moderating variable weakens the negative relationship between ownership concentration and firm growth. Specifically, in industries with high growth rates, investment opportunities are more abundant and even firms with concentrated ownership structures have a greater incentive to take advantage of these opportunities
Conclusion: Based on the research results, it can be said that ownership concentration generally has an inhibitory effect on company growth, but this effect decreases in high-growth industrial contexts. Therefore, policymakers and managers should consider environmental and industrial conditions when interpreting the effects of ownership concentration. It is also suggested that investors should consider the dynamics of the relevant industry in their assessments when analyzing the ownership structure of companies. From a theoretical perspective, this research also contributes to the development of the literature on corporate governance and organizational growth by emphasizing the role of external conditions in moderating intra-firm relationships.
Innovation: In growing industries, managers can use development policies such as entering new markets, investing in innovation and technology, and using external financial resources to provide growth-generating investments to make the most of industry opportunities. Finally, it is suggested that future research examine the role of corporate governance mechanisms on the relationship between ownership concentration and firm growth. Future research should examine how supervisory mechanisms such as board independence, audit quality, and the role of institutional shareholders can moderate the effect of ownership concentration on firm growth.