Ownership Structure, Corporate Governance, Corporate Performance and Egyptian Revolution: Evidence from an Emerging Market

A crucial question is investigated in the present work, namely: in which way has the
2011 Egyptian Revolution affected, economically speaking, firm performance,
ownership structure types, and corporate governance mechanisms? Ownership
structure and corporate governance (hereafter referred to as CG) are two of the most
important variables affecting firm performance. Accordingly, this study shows how
the Revolution impacted the relationship between CG mechanisms and firm
performance, as well as that between ownership structure types and firm performance.
Furthermore, it studies the extent to which Egyptian listed firms which voluntarily
comply with and disclose Egyptian CG practices have been affected by the
Revolution of 2011. This essential question is answered using a sample of 101 (992
observations) non-financial listed Egyptian companies for the period spanning 2008-
2017 using agency theory and resource dependence theory.

The results revealed that the Revolution has had a negative and significant impact on
firms’ performance measured by ROA, ROE, and Tobin’s Q. Similarly, the
Revolution has had a negative effect on the relationship between ownership structure
types and firm performance, but a positive impact on the relationship between CG and
firm performance. These findings shed light on the important role of CG in helping to
overcome the negative effect of the Revolution and putting an end to companies’
internal drawbacks. Overall, the results are consistent with the predictions of agency
theory and resource dependence theory. The thesis’ results have important
implications for investors, analysts, regulators, policymakers, and managers who are
interested in firm performance and who wish to overcome the economic consequences
of the Egyptian Revolution of 2011. Said implications include highlighting the
importance of the CG practices to improve firm performance in Egypt by enhancing
the current disclosure of CG practices and the CG annual reports to support future
empirical studies. Moreover, the findings are useful for researchers investigating how
the Revolution has affected the ownership structure of Egyptian firms.

The thesis’ main contribution is to study the economic impact of the Egyptian
Revolution on Egyptian firms. This contribution can be explained and divided into the
following key parts. First, this thesis illustrates the impact of the Revolution on the
relationship between firms’ internal CG mechanisms and firm performance, while at
the same time highlighting the importance of the internal CG mechanisms. Both of the
above-mentioned theories are used, as the economic impact is a crucial question,
meaning that different theories are needed to answer and support it. Furthermore, the
study provides evidence related to the aforementioned economic impact in a voluntary
CG setting and a “comply or explain” CG code together in Egypt. Second, the
Revolution’s impact on the relationship between ownership structure types and firm
performance is examined. Said examination shows the importance of having certain
types of ownership in order to recover from such an economic impact. The thesis
advances knowledge of the Revolution’s impact by studying how a revolution
influences financial performance. Third, and finally, in order to ensure that the
findings are robust, the present thesis employs a number of econometric methods that
deal with different types of endogeneities and lagged effect, namely the system
generalized method of moments (SGMM) and principal component analysis (PCA).
The purpose of this is to ascertain the exact effect of the Revolution on the mentioned
relationships.