The relationship between ownership structure and firm performance: An empirical analysis of listed companies in Kenya

Abstract

The study investigated the effects of ownership structure on performance of listed companies in Kenyausing agency theory as an analytical framework. Ownership structure was operationalized in terms ofownership concentration (percentage of shares owned by the top five shareholders) and ownershipidentity (actual identity of shareholders). Measures of performance were return on assets, return onequity and dividend yield. Forty two (out of fifty four) listed companies were studied using both primaryand secondary data. Reliability of data was tested using Cronbach’s Alpha, while tolerance andvariance-inflation factor were used to test multicolinearity. Using Pearson’s product moment correlationand logistic regression, the study found that ownership concentration and government ownership havesignificant negative relationships with firm performance. On the other hand, foreign ownership, diffuseownership, corporation ownership, and manager ownership were found to have significant positiverelationships with firm performance.

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