M.A. MOUSTAFA, UNITED ARAB EMIRATES UNIVERSITY, UAE
This paper examines the effect of separation between ownership and control on firm performance through testing whether there is a significant difference between the performances of 24 owner-controlled (OC) firms versus 25 manager-controlled (MC) firms in UAE using the averages of the accounting data over the five years 2002-1998.The empirical results reveal that the OC firms outperformed the MC ones and hence support the expectations of the managerial theory of the firm and the agency theory. The results may be explained by the passive behavior of the owners of the MC firms and/or the moral hazard and adverse selection behavior of their managers.
Keywords: Ownership; Control; Managerial Theory of the Firm; Agency Theory and Performance.