The relationship between ownership structure and the value of firms listed at the Nairobi stock exchange

Abstract

This paper sought to establish whether there is a relationship between ownership structure and the value of firms listed at the Nairobi Stock Exchange. The study focused on the concentration of ownership in order to test the monitoring and expropriation hypothesis and on insider ownership in testing of the convergence-of-interest and entrenchment hypothesis. Empirical evidence in this study supports a quadratic relationship between firm value and ownership concentration. These results confirm not only the monitoring but also the expropriation effect for the very highest concentration values. Additionally, the insider ownership model provides results that support a cubic specification for the value-insider ownership relation. This evidence therefore is interpreted to be consistent with both the convergence-of-interests and the entrenchment effect hypotheses.