MODERATION EFFECT OF SIZE ON THE RELATIONSHIP BETWEEN OWNERSHIP STRUCTURE AND FIRM VALUE

Abstract

Firms differ in sizes and manifest varied ownership patterns that can lure agency costs
and affect shareholders value. The size of a firm can be modelled to explain when the
link between ownership patterns and value changes. Therefore, this paper provide
insights on the effect of size on the relationship between ownership structure and value
of listed firms at the Nairobi Securities Exchange. The study population consist all the 64
quoted firms as at 31st December 2017. Panel corrected standard errors estimation was
adopted for the analysis. The study findings reveal that the size of an entity aggravates
the negative relationship between managerial ownership and value while foreign
ownership and entity value has a positive enhancing effect on value. Meanwhile, the
nature of relationship between institutional ownership and entity value does not depend
on size. The findings revives the debate on the practice effectiveness of employee share
ownership schemes for big firms directors. Further, a policy insight that large entities
can enhance governance mechanism by attracting foreign investors in their shareholder
constituents but not for institutional investors.