The Effect of Privatisation on Financial Performance of Firms Listed at the Nairobi Securities Exchange
Abstract
Hongo (2006) while looking at the effect of privatization rate on SOE financial
performance where she found that the rate has no effect also observed that no study
had been undertaken in Kenya on the effect of privatization on the already privatized
former state owned enterprises (SOEs) listed at the NSE.Therefore this study analysed
the effects of privatization on financial performance of former state owned enterprises
that are now listed at the NSE.
The study employed descriptive survey design on a population of privatized former
SOEs quoted at NSE. The study used secondary data sources in collecting
information; internet, periodic report and brochures for a period of five years before
and five years after privatization of each SOE. The data was analyzed for variation
using a regression model where the independent variable performance is regressed
against dependent ratios i.e. profitability ratio, liquidity ratio, leverage ratio and
activity ratios, a t-test statistic, to test the hypothesis on whether there is any
significance difference in financial performance after privatization was also
performed.
The study concluded that privatization had a positive impact on the financial
performance of these firms as it increased their profitability and activity ratios. The
results of the study also showed varied performance results from the other ratios .The
recommendation of the study is that the managers of these SOEs should focus more
on attracting foreign direct investments into the firm and the government should
relinquishing all of their control on the privatized firms and let them operate on their
own.
Citation
A Research Project Submitted In Partial Fulfilment Of The Requirements For The Award Of The Degree Of Master Of Business Administration (MBA), School Of Business, University Of Nairobi.Publisher
University of Nairobi School of Business