Effect of Corporate Governance, Capital Structure and Ownership on Corporate Value of Companies listed at the Nairobi Securities Exchange

Abstract

The purpose of the study is to determine why cases of underperformance and corporate failure continue to increase in frequency and magnitude despite attempt by regulators to strengthen corporate governance and operation discipline. The study aim at establishing the joint effect of corporate governance, capital structure, ownership structure, and firm value for companies listed at the Nairobi Security Exchange (NSE). The study tests the hypothesis that there is no significant joint effect of corporate governance, capital structure, ownership structure on corporate value. 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. 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 study adopted a descriptive longitudinal design which incorporated panel data. The multiple regression analysis was used to test the joint effect of corporate governance, capital structure, ownership structure, and corporate value. The joint effect of corporate governance, capital structure, and ownership structure on corporate value was found to be positive and significant. This study makes an original contribution as it takes an expansive approach of corporate governance development by probing whether improving corporate governance is linked to the enhanced corporate value. This study contributes to the inconsistent corporate finance theories by practically exploring the interactions between corporate governance, capital structure, ownership, and corporate value. The study contribute to policy as well as practice by enhancing comprehension of the tools through which CG affects corporate value. The findings assists corporate management to appreciate the linkages between board activities, management functions, and Corporate Value of NSE listed firms. The study recommends that corporate shareholders, boards, regulators, and management of listed corporations should put in place robust policies that will ensure the implementation and monitoring of corporate governance principles and ensure congruence in their activities of oversight of corporate objectives of optimizing corporate value, minimize fraud and failure risks of corporations.