The effects of ownership structure on performance of non-banking institutions:Evidence from Nairobi stock exchange.

Abstract

This study investigates the relationship between ownership structure and corporate performance of companies within the MIMS excluding banks listed on the Nairobi Stock Exchange during the period 2004-08. In the present study, the ownership structure is considered in terms ownership mix and ownership concentration. Under ownership mix, institutions, Individuals and Foreign investors were analyzed. In ownership concentration, ownership was categorized into low, moderate and high based on the number of shares held by different investors. The study uses Market-to-Book Value Ratio ( MBVR) Return on Equity (ROE), and Tobin's Q ratios as measures of firm performance. From the analysis it was found that in average foreigners owned 22.1%, Individuals 23.6% and Institutions 54.5%. There exists a statistically significant positive correlation between all measures of performance ( ROE, MBVR and Tobins’ q ) and Foreign holdings at 5% level of significance. Correlation analysis showed that there exists a statistically significant positive correlation between all measures of performance and Foreign holdings at 5% level of significance. The results also indicate a statistically significant negative correlation between two measures of performance (ROE and Tobins Q) and institutional holdings at 5% level of significance. The result of the regression analysis showed that there exists a negative relationship between firms’ performance and all ownership structure variables. This again implies firm performance will be expected to be high in firms with less individual, institutional and foreign ownership