Ownership structure dimensions, firm performance and corporate social responsibility disclosure Among listed firms in Nairobi securities exchange, Kenya

Abstract

Corporate social responsibility (CSR) is picking pace in many listed companies in Kenya both as a marketing and sustainability tool. However, the existing literature is inconclusive about the relationship between ownership structure dimensions and corporate social responsibility disclosure. This is because it assumes, tacitly, that this relationship is direct. An alternative viewpoint that has received less attention is that this direct relationship can be mediated by other contextual variables such as firm performance. This study therefore investigated the relationship between ownership structure dimensions, firm performance and corporate social responsibility disclosure among firms listed at Nairobi Securities Exchange. Specifically, it determined the effect of managerial ownership, institutional ownership, foreign ownership, and concentrated ownership on corporate social responsibility disclosure and determined the mediating effect of firm performance on the relationship between ownership structure dimensions and corporate social responsibility disclosure. Explanatory research design is used. The theories that guided the study are Agency, Stakeholder, Resource-Based View, legitimacy, and stewardship theories and is anchored on positivism paradigm. Panel data was collected through content analysis of audited financial statements and annual reports from all the 44 listed firms in the Nairobi Securities Exchange that fit the inclusion criteria between 2007- 2018. Random effects model was chosen after evaluation using Hausman test. The most common ownership structure dimension among all the selected firms was concentrated ownership followed by institutional ownership with managerial ownership being the least. Ownership concentration was most common in the telecommunication industry, while institutional and managerial were most common in automobile and investment sectors, respectively. The highest performing firms were in the automobile sector followed by banking and telecommunication industries. Managerial ownership (𝛽=0.0071,𝑝<0.05), Institutional ownership (𝛽=0.0070,𝑝<0.05)and Foreign ownership structure dimensions (𝛽=0.0032,𝑝<0.05) had a positive and significant effect on CSR disclosure while concentrated ownership negatively affected CSRD (𝛽=−0.0022,𝑝<0.05). A positive mediation effect of firm performance was observed in the relationship between managerial ownership (𝛽=0.165,𝑝<0.05), institutional ownership(𝛽=0.025,𝑝<0.05) and concentrated ownership (𝛽=0.024,𝑝<0.05) and CSR Disclosure. However, there was a negative mediation effect on foreign ownership and CSR disclosure (𝛽−0.001,𝑝<0.05). There was a partial mediation of firm performance on the relationship between ownership structure dimensions and CSR disclosure. Financial scholars must consider the effect of firm performance when examining the relationship between CSR disclosure and the firm’s ownership structure. Managers of listed firms should promote the possibilities of shareholders and other stakeholders’ confidence in the firm through transparency and openness on CSR engagement and its disclosures.