The Effect of Breadth of Ownership on Stock Performance for Firms Listed at the Nairobi Securities Exchange, Kenya

Abstract

The study sought to determine the effect of breadth of ownership on stock performance of firms listed at the Nairobi Securities Exchange (NSE), Kenya. In this research, descriptive research design was used and the population of the study was 63 firms that were listed as at 31 st December 2019. However, only listed firms that had consistently traded during the period of study were considered. As such, only 47 companies qualified to be in the study. Yearly data for five years (December 2015 to December 2019) was collected and analyzed. Results showed that the adjusted R-Square was 0.197 which indicated that 19.7% of variance in stock performance of firms that are quoted at the NSE are explained by breadth of ownership and the control variables (size and dividend). The F – statistic was 0.006 (<5%) which implied that breadth of ownership, firm size and dividend policy collectively significantly influence stock performance for companies that are listed at the NSE. Results from the regression analysis showed that breadth of ownership (P-value=0.048) and firm size which was a control variable had a significant relationship with performance of stock at 5% significance level (p-value = 0.001) Dividend policy (control variable) had a positive but insignificant relationship with stock performance at 5% significance level. A negative association between size of company (control variable) and stock performance of listed firms at the NSE was evidenced. The study recommends that firms with a higher number of shareholders continue increasing their shareholders as it has been established that firms with many shareholders have higher stock performance. Further, the study recommends the listed firms should take into consideration the company size as it negatively affects performance. The study recommends that listed firms should increase their dividend payout since dividends are used as benchmarks for the degree of expected future growth. The study suggests that further research should be done in stock markets across the East African region to enable comparison of results and generalization of the findings.