Open AccessFirm Ownership Characteristics and Long-run Return on Equity Issued: A Case of the Nairobi Securities Exchange
Author(s) -
Martin Khoya Odipo,
Tobias Olweny,
Oluoch Oluoch
Publication year - 2021
Publication title -
journal of economics and public finance
Language(s) - English
Resource type - Journals
eISSN - 2377-1046
pISSN - 2377-1038
DOI - 10.22158/jepf.v7n3p131
Subject(s) - business , equity (law) , shareholder , market capitalization , leverage (statistics) , return on equity , return on assets , monetary economics , state ownership , stock exchange , panel data , shares outstanding , accounting , finance , economics , stock market , corporate governance , emerging markets , econometrics , paleontology , horse , machine learning , political science , computer science , law , biology
This investigation looked at the link between firm ownership characteristics and long-run return on firms that issued equity at the Nairobi Securities Exchange (NSE) in Kenya. The study covered 12 firms that issued shares in the NSE market from 2006-2008. Ownership characteristics included (state ownership, institutional Ownership, foreign Ownership, big five shareholders, market capitalization, age of the firm and Leverage of the firm) in relation to the average return. The study tested whether each of the firm ownership characteristics influenced long-run performance. Annual return for these companies was based on market return for five years after the firm’s equity shares were issued. The long-run performance was compared with three benchmarks, namely, NSE index, CAPM and Matching firms. Seven hypotheses were developed for the study. Simple-liner and multi-linear regression analyses based on panel data were carried out to relate the extended run return on shares issued. The result of the survey showed that issuing firms performed better than non-issuing firms. These issuing firms also performed better in comparison to CAPM. However, the issuing firms performed worse than NSEI. In conclusion, the long-run performance of equity issued at the NSE does not necessarily underperform relative to non-issuing establishments.