Influence of Ownership Concentration on Financial Performance of Listed Firms in Nairobi Securities Exchange, Kenya

Abstract

The purpose of the study was to evaluate the influence of ownership concentration on the financial performance of listed firms in the Nairobi Securities Exchange, Kenya. For this study, the target population is represented by several companies from different sectors listed on the NSE in Kenya from 2016-2020. The study used data from firms that were consistently listed in NSE from 2016 – 2020 the ones that were delisted and or suspended and that were listed after 2016 was not included, creating a sample size of 55 firms yielding a panel of 275 data points. The study adopted a purposive sampling approach since it satisfied the criteria of my study. The study used secondary data obtained from annual audited financial statements of listed firms using data collection sheets. The results showed that local ownership concentration had a negative and insignificant effect on financial performance using ROA. However, local ownership concentration had a negative and little impact on financial performance using ROE (r=-0.055, p=0.334). Further results showed that government ownership concentration had a negative and significant impact on financial performance using ROA (r=-0.107, p=0.008). However, government ownership concentration had a positive and insignificant influence on financial performance using ROE. In addition, results further showed that foreign ownership concentration negatively and significantly influenced financial performance using ROA (r=-0.072, p=0.205). However, foreign ownership concentration had a positive and insignificant impact on financial performance using ROE. The study also concluded that ownership concentration has a significant influence on the financial performance of listed firms in Nairobi Securities Exchange, Kenya using ROA {F=35.88, p=0.000)} with overall R Square of 0.250 but had no significant influence on the financial performance of listed firms in Nairobi Securities Exchange, Kenya using ROE {F=4.910, p=0.437)} with overall R Square of 0.105. The study recommends that there should be a substantial shareholding with a sizable number of shares to take control of the company's performance with passion and interest.