Implications of Shareholder Types on Financial Performance: Empirical Evidence from Listed Companies in Kenya

Abstract

Scholarly interest in the relationship between shareholder types and firm performance has been evident since the seminal work of Berle and Means of 1932. The many researches so far conducted have, however failed to give conclusive results. The study whose results are reported in this paper therefore, sought to address the glaring knowledge gap, especially with regard to developing countries. The typical shareholder types among listed companies in Kenya are government; foreigners; institutions; managers; and diverse shareholders. Using Logistic Regression, the relationships between shareholder types and financial performance as measured by ROA, ROE and DY were tested. The results indicate a significant negative relationship between state ownership of firms and financial performance. On the other hand, foreign, insider, diverse and institutional ownership gave significant positive relationships with financial performance. Collectively, these results are consistent with pertinent literature with regard to the implications of government, foreign, manager (insider) and institutional ownership forms, but significantly differ concerning the effects of diverse ownership on financial performance.