Effect of Corporate Restructuring on Financial Performance of Listed Commercial and Service Firms in Kenya

Abstract

The objective of this study was to examine the effect of corporate restructuring on the financial performance of financial institutions in Kenya, considering that over the years. It has become a common practice for companies around the world to restructure, as the expectation is that when management of a firm employs different restructuring techniques, some effect on the performance of the firm will be felt. Data from 10 listed Commercial and service firms in Kenya was analysed, during the seven-year period of the study from 2011 to 2017. Data was collected from financial statements of the companies studied. Computation of the various ratios that make the variables under consideration namely Return on Equity, Financial restructuring, portfolio restructuring, operational restructuring, firm size and liquidity. Data was analysed using descriptive and inferential statistics. The data was analysed with the help of STATA version 14. Descriptive statics included mean, standard deviation, minimum and maximum while inferential statistics involved diagnostic tests and panel data regression analysis in a bid to establish if there is any effect of Corporate restructuring on the financial based performance of listed commercial and service firms in Kenya. The findings indicated that the model explains 82.4% of the total variation in financial performance of the listed commercial and service firms in Kenya. It was further noted operational restructuring and firm size had a statistically significant positive impact on financial performance of the listed commercial and service firms in Kenya. Additionally, financial restructuring and portfolio restructuring had negative impact on financial performance of listed commercial and service firms in Kenya. Overall, the results indicate that corporate restructuring had a positive impact on financial performance of the listed commercial and service firms in Kenya. The study recommends that management of the listed commercial and service firms in Kenya should focus on financial restructuring and operational restructuring to improve financial performance.”