The Effect of Ownership Structure on Financial Perfomance of Sugar Manufacturing Firms in Kenya

Abstract

The effect of ownership structure on firm performance can be evaluated in two dimensions: ownership concentration and owner identities. Ownership concentration provides quantifiable information about the rights of the largest investor(s). Owner identity offers qualitative information about the identity of the controlling investor(s). The objective of the study was to examine the effect of ownership structure on the economic performance of Sugar Manufacturing Companies in Kenya. The study adopted the descriptive research design. The data was acquired from document analysis of consolidated financial reports of years ending December: From 2008 to 2015 of the sugar companies. The data was analyzed using multiple regression and correlation analysis to establish the relationship between the independent and dependent variable. From the findings, the regression model describing the relationship between the study variables is significant at the 0.05 level. This indicates that the financial performance of these companies was significantly affected by their ownership structure and sizes. Also, the coefficients of the regression model were found to be significant, exemplifying the significant influence of the study independent variables on the companies’ financial performance. The researcher recommends future studies that may, in an attempt to consider the effect of all types of debt comprehensively, separate different types of debt based on where they are issued. For example, corporate bonds or capital market issued debt can be separated from commercial bank loans, or debt from financial institutions. The separation can be done by introducing specific types of debt as distinct independent variables. This may allow evaluation of the effects of different types of debt on the financial performance.