Ownership structure and performance of non-financial institutions listed in the Nairobi securities exchange

Abstract

The discussion on the relationship between firm ownership and performance has not been concluded, despite the number of studies that have been conducted to establish the same. This study investigated the relationship between ownership structure and performance of non-financial institutions in the MIMS sector of the Nairobi Securities Exchange during the period 2005 - 2012. In the present study, the ownership structure was considered in terms of foreign and local, and subsidiary, associate and trade investment. The study used Return on Total Assets (ROTA) as the measure of firm performance. The data collected from the sample companies was analysed using regression analysis. Other factors such as firm’s age and size were also taken into consideration during data collection and analysis. From the analysis it was found that 6 out of 8 years under study did not reveal any significant relationship between any of the ownership aspects analysed and firm performance, at a significance level of 5%. This means that 75% of the firms’ performance was not in any way related to its ownership structure, whether local or foreign, subsidiary, associate or trade investment. Still, the 25% that showed significant statistical relationship had some trends of no significant relationships, for example in the year 2006 there was no difference in the performance of local and foreign companies, no difference in performance of associates and subsidiaries. These findings mean that overally; there is no significant relationship between firm ownership structure and performance. Firm ownership structure therefore does not need be taken into consideration in planning for and projecting firm performance, since it has no significant impact on firm performance