Government Ownership and Financial Performance. Evidence from Listed Firms in Nairobi Securities Exchange

Abstract

Purpose: The main purpose of this paper was to establish the effect of government ownership on the financial performance of companies listed at the Nairobi Securities Exchange (NSE) in Kenya.

Material/methods: The study adopted a positivist research philosophy guided by Agency Theory. An explanatory research design with a longitudinal approach was employed. A census survey was conducted on all 63 firms listed at the NSE, and secondary data were extracted from their financial statements over an 11-year period from 2014 to 2024 using a structured data collection sheet. Both descriptive and inferential statistics were applied in the analysis. Common effects, fixed effects, and random effects models were compared, and the coefficients from the most appropriate model were fitted into the final regression equation. Data analysis was conducted using the STATA statistical package.

Findings: The findings revealed that government ownership has a positive and statistically significant effect on firm financial performance. The study further established that ownership structure significantly influences firm performance, while financial leverage acts as an enhancing moderator that strengthens the positive effect of government ownership.

Conclusion: The study concludes that government ownership plays an important role in improving the financial performance of listed firms. It also affirms that the interaction between ownership structure and financial leverage is critical in shaping firm outcomes.

Value: The study adds to the existing literature on ownership structure and firm performance by providing empirical evidence from listed firms in Kenya. It also offers practical insight to firms and policymakers on the importance of maintaining optimal levels of government ownership to enhance governance and operational efficiency.