Corporate Restructuring and Firm Value of Companies Listed in Nairobi Securities Exchange

Abstract

The current Kenyan business environment has been changing drastically. Some of these changes include: continued fast track liberalization of the economy by the government, direct control, the elimination of price controls, diversification and divestment and commercialization of the public sector, and increased competition. Corporate restructuring refers to the reorganization, redesigning, and rethinking of some or all structures of the organization due to tough economic conditions to enhance performance and become more competitive in the industry. The specific objective of the study was thus to evaluate the effect of corporate restructuring on firm value of the listed institutions in NSE, Kenya. Specifically, the study evaluated the effects of asset restructuring, capital restructuring, portfolio restructuring and operational restructuring within the framework of the listed firms in Kenya. The main study population was 62 firms trading in NSE. Therefore, the type of data utilized in the conduct of the study was secondary data. The secondary data was collected from; Company financial statements and Kenya National Bureau of Statistics for three cycles of financial data dated from 2017 to 2023. Normality, linearity heteroscedasticity, stationary and multi-collinearity linearity test was conducted at 95% confidence interval. Analysis was carried out in Stata. The descriptive statistics used in the study were frequency, mean scores and standard deviations. Analytical model of interest in this study was the panel regression model and correlation analysis. Using the multiple regression equation, the predictor variables were the independent variable in a dependent variable that is firm value. The findings realized that capital restructuring had an inverse relationship with operational restructuring regarding the firms’ value. Consequently, the study established a positive relationship between portfolio restructuring and asset restructuring on firms’ value. The study concluded that firms view both portfolio and asset restructuring as complementary activities aimed at enhancing organizational efficiency and long-term value creation. Capital restructuring is associated with efforts to improve financial stability and align capital composition with the firms' evolving strategic goals. This study recommended that integrated approach to restructuring adds depth to the literature, suggesting that firms in emerging markets must manage their assets, capital operational and portfolios restructuring in tandem to enhance competitiveness and long-term performance.