Corporate Governance, Capital Structure, Ownership Structure, And Corporate Value Of Companies Listed At The Nairobi Securities Exchange

This paper focuses on establishing the relationship among corporate governance, capital structure, ownership structure, and firm value for companies listed at the Nairobi Security Exchange (NSE). The study tested three hypotheses that explored various aspects of this relationship: First, there is no intervening effect on the capital structure on the relationship between corporate governance and corporate value; Second, there is no significant moderating effect of ownership structure on the relationship between corporate governance and corporate value; and finally, there is no significant joint effect of corporate governance, capital structure, and ownership structure on corporate value. The data of the study was obtained from audited financial statements of the firms listed at the NSE. A census survey for sixty-four publicly trading firms at the NSE was undertaken. The data of 64 corporations was cleaned, leaving a smaller number of 58 firms which formed over 90% of the sample. The analysis covered a five-year period between 2013 to 2017. The study adopted a positivism philosophy and a descriptive design. Descriptive statistics and diagnostic tests were undertaken and thereafter inferential statistics, specifically correlation and regression analysis, were used for hypothesis testing. The multiple regression analysis was used to test the relationship among corporate governance, capital structure, ownership structure, and corporate value. The panel data procedure was considered more appropriate as the sample data contained both cross-sectional and time-series data. The Baron and Kenny’s (1986) approach was used to assess the intervening and moderating effect of capital structure and ownership structure respectively on the relationship between corporate governance and corporate value. Corporate Governance was measured by a composite of board independence, board size, board remuneration, and corporate gender diversity. Capital structure was measured by leverage, while ownership structure was measured by ownership concentration, state ownership, family ownership, and foreign ownership. Firm performance was measured using the Tobin Q. The joint effect of corporate governance, capital structure, and ownership structure on corporate value was found to be positive and significant. However, Ownership structure and capital structure had no significant moderating and intervening effects respectively on the relationship between corporate governance and corporate value. This study makes an original contribution as it takes a more holistic approach of corporate governance development by probing whether improving corporate governance is linked to the enhanced corporate value. The study recommends that corporate shareholders, boards, regulators, and management of listed corporations should put in place robust policies. This will ensure the implementation and monitoring of corporate governance principles and ensure congruence in their activities of the oversight of corporate objectives of optimizing corporate value and minimizing fraud and failure risks of corporations

Effect of Capital Structure on the Relationship Between Corporate Governance and Corporate Value of Companies Listed at the Nairobi Securities Exchange

The capital market authorities of different areas have from time to time issued regulations and guidelines for good corporate governance practices ensuring thorough and proper management of listed companies to align the interest of all stakeholders, ensure firm sustainability, and optimize corporate value. Despite these interventions, cases of corporate underperformance and failures attributed to financial distress and governance weakness continue to increase in magnitude and frequency. The main objective of the study was to determine the intervening effect of capital structure on the relationship between corporate governance and corporate value of companies listed at the Nairobi Security Exchange (NSE). The study tests hypothesis that there is no intervening effect on the capital structure on the relationship between corporate governance and corporate value for companies listed at the NSE. The key theories underpinning the study were agency theory as the main guiding theory and the trade-off theory. The data was acquired from past audited financial statements of companies listed at the NSE. The study used a census survey for sixty-four listed companies at the NSE. The analysis covered a period of five years between 2013 and 2017. Corporate Governance was measured by a composite of Board Independence, Board Size, Board Composition, and Corporate Gender Diversity. Capital structured was measured by leverage Different performance metrics have been used to evaluate corporate value worldwide by regulators and scholars. This study used Tobin - Q which has become an important tool for measuring corporate performance due to its incorporation of the market value of shares in its computation. The study adopts a positivism research philosophy and descriptive design. Descriptive statistics and diagnostic tests were conducted on the data thereafter inferential statistics namely correlations analysis and regression analysis were used to test the hypothesis. The panel data procedure was considered more appropriate as the sample data contained both cross-sectional and time-series data. The diagnostics tests were used to test for bias in the model and the regression used to test the strength and direction of the variables. Baron and Kenny (1986) approach was used to test the intervening effect of capital structure on the relationship between corporate governance and corporate value. The finding was that capital structure had no significant intervening effects on the relationship between corporate governance and corporate value. This research contributes to the line of literature that examines the desirability of corporate governance in enhancing corporate value. These insights in explaining corporate governance, capital structure, and corporate value relationships are useful for academic understanding and business and public policy formulations. Keywords: Corporate governance, capital structure, agency theory, trade off theory, corporate value. DOI: 10.7176/RJFA/11-17-10 Publication date:October 31st 202

Influence of Corporate Control and Ownership Structure on the Value of Firms Listed at the Nairobi Securities Exchange

This study aimed at establishing the influence of corporate control and ownership structure on corporate values of companies listed at the Nairobi Securities Exchange. The paper tested the hypothesis that there is no significant moderating impact of ownership structure on the relationship between corporate control and corporate value growth based on Tobin Q and ROA measurements. The theory applied were agency theory, stewardship theory and stakeholder theory with the main anchoring theory being the agency theory. The study applied census survey for sixty four firms listed at the NSE. The time frame of analysis is five years between 2013 and 2017. Out of the 64 listed companies targeted, 58 were analyzed forming 90% of the population. The study applied census survey given that the population of the listed companies at the NSE were not many. Out of the 64 listed companies targeted, 59 were analyzed forming 92% of the population. Corporate control index was developed as a proxy for corporate control and ownership structure index was developed as a proxy for ownership structure. While ROA and Tobin Q were used to measure corporate value. The hypotheses were tested using both correlation and regression analysis. The key study variables of the listed companies were subjected to descriptive statistics and the results revealed a significant positive relationship between the variables. The study findings revealed significant moderating effect on the relationship between the value of the firm and its ownership structure

Influence of Corporate Control and Capital Structure on the Performance of Firms Listed at the Nairobi Security Exchange

This study aimed at establishing the influence of corporate control and capital structure on performance of firms listed at the Nairobi Securities Exchange. The focus was on how the link concerning corporate control and corporate’s returns is influenced by debt-equity structure for these listed firms. The paper tested the hypothesis that there is no significant intervening effect of capital structure on the nexus between corporate control and firm performance as measured by ROA and Tobin Q. The theory applied were agency theory and trade off theory. The study applied census survey for sixty four firms listed at the NSE. Leverage was used as a measure of capital structure while ROA and Tobin Q were used to measure corporate value. Regression analysis and correlation analysis were used to test the hypotheses. The key study variables of the listed companies were subjected to descriptive statistics and the results revealed a significant positive relationship between the variables. The intervening effect of debt-equity ratio was found to be significant in the relationship between in corporate control and corporate value. The study findings were in line with previous research findings also provided further insight on the contribution of independent variable, corporate control on the dependent variable, corporate value. Analyst and investors can utilize the findings to identify the key corporate control mechanism in financial markets. Keywords: Corporate control, capital structure, agency theory, trade off theory, firm performance

Corporate Governance, Financial Characteristics, Macroeconomic Factors and Performance of Manufacturing Firms Listed at the Nairobi Securities Exchange

Performance of manufacturing firms listed at the Nairobi securities exchange has been varied since the introduction of the corporate governance policies and practices in the year 2002. This has been blamed to a number of factors including financial characteristics and macroeconomic factors. The specific objectives were to establish the effect of corporate governance on performance of manufacturing firms listed at the Nairobi securities exchange; to determine the intervening effect of financial characteristics on corporate governance and performance of manufacturing firms; to establish the moderating effect of corporate governance and performance of manufacturing firm; and to determine joint effect of corporate governance, financial characteristics, macroeconomic factors and performance of listed manufacturing firms at the Nairobi securities exchange. This study was anchored on, agency theory, stewardship theory, stakeholders’ theory and resource dependence theory. The study used census approach and a target population of 10 manufacturing firms listed at the Nairobi securities exchange between 2002 and 2016 were incorporated. This study employed longitudinal descriptive research design to determine relationships amongst independent, intervening, moderating and dependent variables. A panel data regression analysis was conducted using random effects model. The study findings revealed that corporate governance had insignificant effect on performance of listed manufacturing firms in Kenya; investments, leverage and liquidity  significantly intervene in the relationship between corporate governance and performance of listed manufacturing firms; interest rate, inflation rate and  growth domestic product rate, significantly affect returns on assets and Tobin’s Q of listed manufacturing firms in Kenya; and corporate governance, financial characteristics and  macroeconomic factors were good predictors of listed manufacturing sector firms’ performance. Keywords: Firm performance, corporate governance, financial characteristics, macroeconomic factors, manufacturing firms, Nairobi securities exchange DOI: 10.7176/RJFA/10-22-08 Publication date: November 30th 201