The Impact of Institutional Ownership on Firm Performance: Evidence from Pakistan’s Textile Industry Using Panel Data Analysis

Abstract

Using panel data from 63 listed companies between 2012 and 2021, this study investigates the effect of institutional ownership on the financial performance of businesses in Pakistan's textile sector. The study examines the connection between institutional ownership and important performance metrics including return on equity (ROE) and return on assets (ROA) using panel data regression approaches, such as Generalized Least Squares (GLS), Fixed Effects (FE), and Random Effects (RE) models. The results show that institutional ownership has a statistically insignificant negative impact on firm performance, suggesting that institutional investors might not be the key to improving financial outcomes in this industry. In contrast, firm-specific characteristics, including profitability, age, and risk, positively and significantly influence performance, while leverage and the market-to-book ratio are found to have a negative impact. The study concludes that firm performance in Pakistan’s textile sector is influenced by a complex interplay of factors, with institutional ownership playing a limited role, while firm-specific attributes, particularly profitability and risk management, emerge as more significant determinants.