Effect of firm ownership structure on financial performance of privatized state corporations in kenya

Abstract

Privatization represents a revolution in the role of government in promoting economic growth and development by allowing private equity owners to buy stak e on State Owned Enterprises . Privatization has high likelihood of increasing firms’ profitability given that private equity owners with the stake in the firm will always want the firm run efficiently . The main aim of the study was to examine the e ffect of firm ownership structure on financial performance of privatized state corporations in Kenya. The study adopted descriptive research design . The target population of the study was the 11 privatized listed firms in Nairobi Stock Exchange . The study collect ed secondary data from the 2006 - 201 6 audited accounts reports. The study use d descriptive statistics including mean and inferential statistics like Pearson Correlation and R egression analysis to establish the relationship between privatization and f inancial performance of these firms . The analyzed data was presented using tables and charts. The study established that based on random effect model statistically chosen for the study, only government shares trading had significant effect on the privatize d firms listed in NSE return on asset indicating that an increase in government shares result ed in an increase in return on asset units keeping private shares, The question whether firm ownership structure affects return on asset of privatized state corporations in Kenya was answered by random model regression analysis. The study established government shares had insignificant effect on the privatized firms listed in NSE return on in vestment; whereas private shares had significant effect on returns on investment, of the privatized state corporations listed in NSE.