Ownership structure and financial distress: is the tale from Sub-Saharan Africa different?

Mohammed Abdulkadir, Samuel Nduati Kariuki and Peter Wang’ombe Kariuki

African Journal of Economic and Management Studies, 2024, vol. 16, issue 1, 127-147

Abstract: Purpose - The paper investigates the effect of ownership structure on the financial distress of firms listed in sub-Saharan Africa. Design/methodology/approach - Using secondary data from 106 non-financial firms listed in 9 selected SSA countries from 2016 to 2021, the research using pairedt-tests and conditional logistic regression model analysed a sample of 174 distressed observations matched with 174 non-distressed observations. Findings - T-tests determined significant differences between distressed and non-distressed groups concerning institutional, foreign, and local ownership. Conditional logistic results established that institutional, foreign, and state ownership significantly reduce distress. However, managerial ownership does not influence financial distress while a significant positive relationship is observed between local ownership and financial distress. Originality/value - This is the first study to investigate the influence of ownership structure, including local ownership, on financial distress in SSA, employing a unique methodology of matched design and conditional logistic regression analysis. Furthermore, the paper presents cross-country evidence from emerging frontier markets, highlighting the importance of governance frameworks in firms’ stability.

Keywords: Ownership structure; Corporate governance; Emerging market score; Financial distress; Sub-saharan Africa (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-03-2024-0153

DOI: 10.1108/AJEMS-03-2024-0153

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