Shareholder Engagement and Firm Value Creating Outcomes in Kenya

Abstract

Purpose: The objective of the study was to determine the firm value creating outcomes arising from institutional shareholder engagement in Kenya. Methodology: The study used data from a sample of 117 institutional investors in the Nairobi Securities Exchange, Kenya, selected using stratified simple random sampling technique. Findings: The study established that the shareholder engagement outcome that significantly explains firm value creation is improvement of a firm’s system of governance, which includes boards of directors that have independent, equitable and minority representation. Implications: The study contributes to literature on shareholder engagement from a Kenyan perspective and adds an impetus to investors, management and policymakers to address issues that are impeding shareholder engagement given its effect on governance and value of the firm. The study recommends that firms invest in improvement in governance structures, and policymakers are advised to maintain an updated register of all the institutional investors, including their current contacts, and a Kenya-specific central depository of data on engagement actions and outcomes across listed companies.