Foreign Ownership and Firm Growth: Evidence from Non-Financial Sector of Pakistan

Abstract

This study has been carried out to examine the role of foreign ownership in firms’ growth of non-financial sector of Pakistan. The study conducted on panel data which consists of 100 non-financial companies listed on Pakistan stock exchange (PSX) for the period of 10 years from 2011 to 2020. Fixed effect model has been used for analysis. Asset growth and sales growth have been used to measure firm growth while foreign ownership is estimated by using fraction of shares held by foreign shareholders. This research study is first of its kind on Pakistani data to investigate the impact of foreign ownership on firm’s growth of listed non-financial companies. The study results show that foreign ownership significantly and positively impacts asset growth in Pakistan which indicates that higher foreign ownership leads to more asset growth. The results also revealed that foreign ownership positively effects sales growth, however this relationship is not statistically significant. Findings of the study will be important for decision makers, investors, and managers to understand the direction of the influence of foreign ownership on firm growth. The findings will help firms and policy makers to frame growth friendly policies.

Keywords: Firm Growth, Foreign Ownership, Panel Data, Fixed Effects Model, Non-Financial Companies, PSX