Private Equity Investments, Ownership Structure and Financial Performance Evidence from Investee Firms in Kenya

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Published Sep 8, 2025
https://doi.org/10.70907/aszwgx73
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Vol. 19 No. 9 (2025): Research Beacon Journal

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Ronald Ongoma Musundi
University of Nairobi, Kenya
Herick Ondigo
University of Nairobi, Kenya
Josiah Aduda
University of Nairobi, Kenya

Abstract

The interplay between private equity (PE) investments and firm ownership structure has significant implications for financial performance, particularly in emerging markets where capital constraints and governance challenges persist. This study examines how ownership structure moderates the relationship between private equity investments and the financial performance of investee firms in Kenya. Anchored on agency theory, trade-off theory, and finance-growth theory, the research disaggregates PE into venture capital, growth capital, and buyout capital, while ownership structure is measured as the proportion of shares held by the largest shareholder. The study utilized a descriptive research design and analyzed panel data from 144 private equity-backed firms over the period 2006 to 2021. Panel regression models with interaction terms were employed to capture the moderating effects. The findings reveal that while all forms of private equity have a positive and statistically significant effect on Return on Assets (ROA), the magnitude of this effect varies depending on ownership concentration. Specifically, firms with moderate ownership concentration benefited most from PE funding, suggesting an optimal balance between managerial control and investor oversight. These results underscore the importance of considering ownership dynamics when assessing the impact of private equity on firm performance. The study offers valuable insights for investors, policymakers, and managers seeking to optimize governance structures to fully harness the benefits of private equity financing.

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Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author Biographies

Ronald Ongoma Musundi, University of Nairobi, Kenya

R. Musundi: PhD Candidate, Department of Finance and Accounting, Faculty of Business and Management Science, University of Nairobi, Kenya (email: ronmusundi@gmail.com) H. Ondigo: Senior Lecturer, Department of Finance and Accounting, Faculty of Business and Management Science, University of Nairobi, Kenya. (e-mail: hondigo@uonbi.ac.ke) J. Aduda: Professor, Department of Finance and Accounting, Faculty of Business and Management Science, University of Nairobi, Kenya. (e-mail: jaduda@uonbi.ac.ke)

Herick Ondigo, University of Nairobi, Kenya

H. Ondigo: Senior Lecturer, Department of Finance and Accounting, Faculty of Business and Management Science, University of Nairobi, Kenya. (e-mail: hondigo@uonbi.ac.ke)

Josiah Aduda, University of Nairobi, Kenya

J. Aduda: Professor, Department of Finance and Accounting, Faculty of Business and Management Science, University of Nairobi, Kenya. (e-mail: jaduda@uonbi.ac.ke)

How to Cite
Musundi, R. ., Ondigo, H. ., & Aduda, J. . (2025). Private Equity Investments, Ownership Structure and Financial Performance Evidence from Investee Firms in Kenya. Research Beacon, 19(9), 110-123. https://doi.org/10.70907/aszwgx73

How to Cite

Musundi, R. ., Ondigo, H. ., & Aduda, J. . (2025). Private Equity Investments, Ownership Structure and Financial Performance Evidence from Investee Firms in Kenya. Research Beacon, 19(9), 110-123. https://doi.org/10.70907/aszwgx73

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