Effect of Ownership Structures on Financial Performance of Listed Manufacturing Firms in Kenya

Abstract

Over the last decade, performance of listed manufacturing firms has been deteriorating with some companies almost collapsing. For instance, Mumias Sugar Company and Eveready have shown dismal financial performance. Prior studies have not addressed the effect of ownership structures on financial performance of manufacturing firms in Kenya. The main objective of the study was to determine the effect of ownership structures on financial performance of listed manufacturing firms in Kenya. Specifically, the study sought: to evaluate the effect of board shareholding on financial performance of listed manufacturing firms in Kenya, to explore the effect of foreign shareholding on financial performance of listed manufacturing firms in Kenya, to investigate the effect of institutional shareholding on financial performance of listed manufacturing firms in Kenya, to determine the effect of individual shareholding on financial performance of listed manufacturing firms in Kenya. This study was pegged on five theories; agency theory, stewardship theory, Stulz’s Integrated Theory, stakeholder’s theory and Resource based theory. This study was undertaken using a descriptive research design. The target population comprised of all seven listed manufacturing firms in Kenya that traded at NSE from 2010 to 2019. The study adopted a census method of data collection. This was made possible using secondary data sheet. Data analysis was undertaken using panel data regression and data analysis results were presented on tables and graphs. The findings revealed that the model linking ownership structures and firm performance was significant. Moreover, the results revealed that foreign shareholding was inconclusive on the effect it has to the financial performance of listed manufacturing firms. Institutional shareholding has negative significant effect on the returns on assets while individual shareholding had a positive and significant effect on firm performance. This study recommended dispersed ownership as it improved financial performance of the manufacturing firms.