Relationship Between Managerial Ownership and Agency Costs of Companies Listed at the Nairobi Securities Exchange

Abstract

Agency cost management is very vital for the overall success of any organization as it has won much academic literature in the recent time. The study analyzed data using SPSS and F-test applied to test for the association between the variables under study. With the increasing cases of cooperate scandals among some top management officials, this study sought specifically to investigate the causality between managerial ownership and agency costs among the NSE in Kenya. Applying the correlation research design on sixty four NSE listed companies, the study found a positive influence of managerial ownership on agency cost and that the relationship was statistically significant on the sixty four companies under investigation. Specifically, the study revealed that a unit increase in managerial ownership led to a 25.03 increase in agency cost when all other factors were held constant. The study’s recommendations are in three folds: that shareholders, who are the owners of the companies, should reward the managers better to reduce the managers from diverting from the company’s ethical standards; that both the private and public policy makers to have a tight proof policy on manager’s rewards and responsibility in running their boardrooms strategies and lastly, managers should adhere to corporate governance.