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. 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 aimed at establishing the relationship between structure of ownership on company’s performance financially and was anchored on two explicit objectives: to ascertain whether institutional local ownership impact on financial performance and to evaluate whether managerial ownership impact on financial performance. This exploration was built on, stewardship, Agency and stakeholder theories which expound an association of structure of ownership and performance financially of all Kenyan listed firms through 2014 to 2018. The examination adopted a causal research design. A census of the 60 listed firms was drawn in this study. Secondary data relating to ownership structure and return on assets was collected using secondary data collection sheet. Panel regression model was 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 was found to have an insignificant impact on Return on assets as shown by the p values of 0. 611.The study recommended 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.