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