Ownership Structure and Financial Performance of Companies Listed at the Nairobi Securities Exchange, Kenya

Abstract

Performance of firms is predominantly contingent on the deliberate decisions cautiously made and executed by the owners therefore a linkage exists between ownership structure and performance financially. Owners are part of a segment that makes decisions by the virtue of their relationship with the firm. Therefore, the question of what maybe the most efficient ownership structure is relevant. Through the period 2014 to 2018, there was an increase in the listed firms that issued profit warnings with others like Kenya Airways and Uchumi Supermarket running into huge financial losses. This research aims at determining the relationship between structure of ownership on company’s performance financially and are anchored on two explicit objectives: to ascertain whether institutional local ownership impact on performance and to evaluate whether managerial ownership impact on performance. This exploration is built on, stewardship, Agency and stakeholder theories which expound an association of structure of ownership and performance financially of all Kenyan listed firmsthrough2014 to 2018. The examination adopts a causal research design. A census of the 60 listed firms is drawn in this study. Secondary data relating to ownership structure and return on assets is collected using secondary data collection sheet. Panel regression model is utilised to ascertain the relationship between the predictor and dependent variables. The effect of Institutional local ownership on Return on assets is significant as shown by the p values of 0.007. Managerial ownership is found to have an insignificant impact on Return on assets as shown by the p values of 0. 611.The study is recommending that in pursuit for high Return on assets firm can come up with incentives to encourage institutions to invest more in the company to raise performance.

Ownership Structure and Bank Performance in Emerging Market Economy: Evidence From Nigerian Listed Deposit Money Banks

“…K. Morck et al (2000), Hart (1995), Mehran (1995), Jensen (1993) who reported positive and significant influence of board ownership on financial performance. Also in tandem with the findings of Alshouha et al (2021), Tayachi et al (2021), Alabdullah (2018), Shleifer and Vishny (1997), Vu et al (2018), Nyaguthii et al (2019), Bhagat and Bolton (2013), Z. Chen et al (2005), Demsetz and Villalonga (2001), R.…”

“…The common notion is that managers will work for the best interests of organizations when they have ownership in the firm and vice versa (Alabdullah, 2018; Shleifer & Vishny, 1997). Thus, an increase in the proportion of shares owned by the managers may help to align the interest of managers and shareholders by restricting them not to waste the firm’s resources for their own well-being (Nyaguthii et al, 2019; Vu et al, 2018). Agency problem may be reduced if managers hold large fraction of the firm’s equity.…”

“…Alshouha et al (2021) and Alabdullah (2018) revealed that managerial ownership has a significant and positive impact on performance. Vu et al (2018), Nyaguthii et al (2019) showed evidence that managerial ownership has a positive impact on firm performance. Krivogorsky (2006) revealed an insignificant and positive association.…”