FOREIGN OWNERSHIP AND FINANCIAL PERFORMANCE OF MANUFACTURING AND ALLIED COMPANIES LISTED ON NAIROBI SECURITIES EXCHANGE, KENYA

Nelson Mandela Mayi, Charity Njoka

Abstract


Manufacturing firms play an essential function in economic growth and national economy. The contribution of manufacturing sector to Kenya's economy has been stable at 10 per cent of Gross Domestic Product. Foreign ownership is an essential in ensuring an improvement in the capital adequacy and liquidity of manufacturing and allied firms. However, despite the adoption of foreign ownership to obtain capital, the financial performance of these firms still remains poor. Return on assets among manufacturing and allied companies listed in Nairobi Securities Exchange decreased from 6.85% in 2015 to 5.83% in 2016 and 2.42% in 2017, but increased to 9.65% in 2018. Therefore, the study sought to examine the influence of foreign ownership on financial performance of manufacturing and allied companies listed in Nairobi Securities Exchange. The study was anchored on eclectic paradigm of Dunning theory. The researcher adopted an explanatory research design. Moreover, target population was 9 manufacturing and allied companies listed in Nairobi Securities Exchange. Since the study population was small, the researcher used a census approach and hence all the manufacturing and allied companies listed in Nairobi Securities Exchange were included. The study used secondary panel data obtained from Capital Market Authority and Nairobi Securities Exchange covering the period between 2015 and 2020. The descriptive and also inferential statistics were employed to analyse data with assistance of STATA version 14. The study established that foreign ownership has a positive and significant effect on the financial performance of listed manufacturing and allied firms in Nairobi Securities Exchange (1=0.7638, p-value=0.368). The study recommends that the government of Kenya should come up with policies to make the Kenyan market more attractive to investors. This can also be done by coming up with favourable labour policies to protect both the employees and investors in various projects. In addition, the firms should encourage foreign investors to take ownership of their companies in order to improve the firms' financial performance as well as increase the company?s exports.

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References


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