Effect of Ownership Structure on Corporate Restructuring Among Firms Listed at the Nairobi Securities Exchange

Abstract

A number of companies listed at the securities exchange market of Kenya have taken to mergers and other forms of restructuring to improve their chance of expanding their capability to offer their services, cutting back on costs and mergers of directorship hired to improve technological progression and improve operational efficiencies required to improve long term financial performance. The various ownership structures of different organizations undergoing corporate restructuring provide a valuable context for investigating whether the expected link between ownership structure and corporate restructuring decision holds true. An investigation of corporate restructuring in Kenya's Nairobi Securities Exchange was the primary goal of this research. New Delhi Stock Exchange (NSE)-listed businesses were studied for their corporate restructuring impact on ownership, concentration and state control. It was decided to base the model's results on characteristics including management effectiveness, liquidity, and profitability. Research was conducted in a descriptive manner. In this study, Kenya's NSE was the intended population. There are 63 companies listed at the NSE but only 55 provided complete data set. Research variables data were derived from audited company's annual financial statements from 2016 to 2020 for all 55 companies making 275 observations. Regression and correlation analysis were used to test the study hypotheses by establishing the relationship between ownership structure and corporate restructuring. The study found that ownership concentration (β=0.111, p=0.000) and state ownership (β=0.118, p=0.000) had a positive and significant relationship with corporate restructuring among NSE listed firms. Management efficiency and profitability (β=0.103, p=0.027) had a significant negative effect on corporate restructuring (β=-0.033, p=0.008) while managerial ownership (β=0.001, p=0.538) and liquidity (β=0.001, p=0.834) were not statistically significant. The results also indicated R2 of 0.234 which implied that the selected independent variables contributed 23.4% to variations in corporate restructuring. The study recommends that policy makers should pay keen attention to ownership concentration, state ownership, management efficiency and profitability as this four has a significant influence on corporate restructuring. The study suggests the need for further studies to focus on other determinants of corporate restructuring.