Ownership Structure and Financial Performance of Manufacturing Firms in Sub-Saharan Africa

Abstract

This study investigates the effect of ownership structure on the financial performance of listed manufacturing firms in three Sub-Saharan Africa countries (Nigeria, Kenya and South–Africa) based on the critical mass indices of their respective bourse. Relevant data from the financial reports of sampled firms were analyzed using the co-integration test and the system-GMM for a period 2010-2019 using Return on Asset, and Tobin-Q as dependent variables while government ownership, block ownership and institutional ownership concentrations were explanatory variables. The empirical results revealed that all the explanatory variables have significant effect on the performance indicators (ROA, TOBIN Q). The result of robustness checks also revealed that both government and institutional ownership concentrations have predominately negative effect on financial performance for the respective countries while block ownership concentration is largely positive for most of the manufacturing firms. The study recommends that policy makers should create favorable policies to encourage balanced investment from all categories of investors and ensure only few owners who have the wherewithal to diversify and attract skills and competencies to improve firm performance. Government should also retain some ownership in foreign and local firms to enhance shareholders’ confidence