Effect of government ownership on financial performance: a survey of partially privatized firms listed at the Nairobi Stock Exchange (NSE).

Abstract

Despite massive literature on effects of governments' ownership, there is still no consensus on the impact of government ownership/control on firm performance. The objective of the study was to assess the effect of government ownership/control on the financial performance of partially privatised listed firms. This study adopted a descriptive survey design. The population of this study was the 56 firms listed on the Nairobi Stock Exchange as at August of 2011. A sample of 16 firms with government shareholding was selected. Secondary data was collected from the annual financial statements of the companies sampled from the Capital Markets Authority, Nairobi Stock Exchange or the respective company premises (including their websites). Data on government ownership/control and firms' financial performance was sought from the annual reports and financial statements. For performance, three year (2008 - 2010) data for each of the firms was sought. A descriptive, univariate and multivariate analysis of data was performed with the aid of SPSS. The descriptive results showed that 7% of firms listed on the NSE are government controlled either ownership by the treasury or a combination of the treasury and other government affiliated institutions. Using non-parametric tests, the study found that there were no statistically significant differences between those which were controlled by the government and those that were not with respect to all the variables except for the shares owned by the treasury. Further, the analysis revealed no significant differences in the performance of government controlled firms and non-government controlled firms.