Foreign Ownership and Financial Performance of Firms Listed at the Nairobi Securities Exchange in Kenya

Abstract

Purpose: The purpose of this study was to establish the effect of foreign ownership structure on the financial performance of firms listed on the Nairobi Securities Exchange (NSE).

Material/methods: The study was guided by Stakeholder Theory. A census survey was conducted on all 63 NSE-listed firms, extracting secondary data from audited financial statements spanning 2014–2024 using a structured data collection sheet. An explanatory research design with a longitudinal approach was adopted, and both descriptive and inferential statistics were employed. Random effects regression analysis was conducted using STATA to assess the relationship between foreign ownership and firm financial performance.

Findings: The results revealed that foreign ownership has a positive and statistically significant effect on firm financial performance, demonstrating that international investors contribute to enhanced profitability and operational efficiency.

Conclusion: The study concludes that foreign ownership strengthens firm profitability among NSE-listed companies.

Value: The study provides insights for managers and investors by showing that foreign ownership enhances firm profitability through improved governance, transparency, and access to international expertise. It guides firms on maintaining optimal foreign shareholding to strengthen operational efficiency and strategic decision-making. Additionally, the findings inform policymakers and capital market regulators on the importance of creating an investor-friendly environment to attract and retain foreign investors, ultimately supporting a more competitive and sustainable Nairobi Securities Exchange.